Last week I listened to the ShunyaOne podcast which featured Pravin Jadhav from PaytmMoney. The podcast has several interesting nuggets on how the PaytmMoney journey started and what challenges they had to solve in bringing out this platform live. But for me, the most important part of the conversation was this statement that most of PaytmMoney users are first-time investors and that they need to lose money first !. Only people who lose money and stick with it will become long term investors. Just this statement alone is enough to say that PaytmMoney and Pravin Jadhav are on to something big and playing the game on a different level and other players are not going to match their vision.
The journey of an investor
Having been in the stock market for the last 15 years I have had my own journey of being a technical analysis based trader in my initial days to building up a stock recommendation service called SmellthCheese which was based on the concept of Pay if You Profit(PIYP).Over the years I have now realised that serious wealth creation in the stock market happens only when an investor picks the right stocks and stays invested for long term(at least 10 years). This is the end state which many will discover if they stick to the stock market journey in the long run. But most investors are not sure when to start and are wary of the risks involved in markets. Due to this most of them start off during a bull run(when everyone is making money) and buy stocks which are the current flavour of the bull market.These investors then lose 70-90% of their capital once the bull markets end. This is the journey which most first time investors face and thus they conclude that investing in stocks is a risky business, while the actual fact is “Owning stocks is risky in the short run. Not owning stocks is risky in the long run.”.
Owning stocks is risky in the short run. Not owning stocks is risky in the long run.” –D.Muthukrishnan
First Order Negative and Nth Order positive
If we look around most successful people and study their life we see a phenomenon calls as ‘First Order Negative and Nth-order positive’. This means if we see the steps which an athlete takes we always see that the initial training period over many years is painful which means all that the athlete sees in his initial years is efforts and the pain associated with it. But he is not worried about the pain (first-order impact of training) and is focussed on the long term aim of winning a medal at the international level. So the first order impact is negative but the Nth order (after many years) is winning a medal.This is a lens with which he/she will view everything which he does in life.If an investor has to build wealth he too should wear the longer term lens and then he will see that the bigger picture of the market. If one looks at the BSE index of the last 20 years then we can see that it has returned a decent CAGR of 12% over that time. Basically, it has always gone up in the long run and I see that this will continue as long as India keeps growing. But the investors don’t have this lens and always look for the very short term. The challenge is getting the investors to see the investing in stocks is not harmful if one has a longer-term view. But the investor needs to go through his own journey where they begin to see the value of staying invested for the long run and this is the education/fees which investor should be willing to make.
PaytmMoney-Investor education platform
“ Only people who lose money and stick with it will become long term investors!” , this statement made by Praveen shows that PaytmMoney is playing the long term game of helping the people see the long term view on equities(and hence MF). They seem to have cracked the distribution bit without having to spend massive amounts because of the PayTm network, but the real challenge is to reduce friction for first-time investors (this is the start) and to get them to see the long term view on stocks and hence build wealth. They seem to have started off well by adding ‘PaytmMoney Investment Packs’ which is a curated set of MF’s into which the investors can invest based on their own risk profile. But for PaytmMoney to make a real impact they need to be able to make the investors see that investing is a long term game with ups and downs. But eventually in the long term, they will make money staying invested in equity(MF). It will be an interesting problem to tackle as it needs to build educational content which nudges people to stay invested for long term. Basically I am seeing PaytmMoney as a massive investor education platform and this is what makes PaytmMoney an exciting startup to study.