Short-Term Observations
Looking at the recent five years of market data, the Nifty 50 has shown one-year negative returns on just 49 days, which is only about 4% of the total period (see the image below).
This is a very small fraction when compared to the overall time. For midcaps, the count is a little higher, while small caps have been negative for 191 days. Even then, it is still close to only 15% of the time. These numbers show that the last five years have been exceptionally strong for equities, with very few days of one-year negative returns.
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Expanding to Ten Years
If we stretch the horizon to ten years, the data starts to look different. Nifty was negative on a one-year basis for 359 days, or about 14% of the time. For midcaps, this figure was 441 days, which makes up 18% of the time. Small caps were negative for 743 days, almost 30% of the total period. This begins to show a clearer picture of how volatility plays out over longer durations. While small caps carry more risk, even in their case, the majority of the time returns were still positive.
The 20-Year View
Over a period of 20 years, the pattern becomes even more balanced. Nifty remained negative for 17% of the time on a one-year return basis. Midcaps were negative for 23% of the time, while small caps touched 33%. These numbers, though higher than the five-year data, show a consistency. No matter the index, the portion of time spent in the negative zone stays within the 15% to 35% range.
Drawing Insights
This simple observation gives us a very clear insight. Around 15% to 35% of the time, markets will show negative one-year returns. But this also means that for the remaining 65% to 85% of the time, the markets are positive. The larger share of time is spent in growth, and that is where long-term investors benefit. While the pain of negative phases feels heavy while going through it, the odds of being in the positive are far stronger.
Long-Term Perspective
When we look at markets with a horizon of five years, ten years, or even more, it becomes easier to handle the short-term pain. A negative phase may last for 15% to 30% of the time, but the rest of the journey can be rewarding. This shows the importance of patience and perspective in investing. Enduring the tough phases is the price to pay for enjoying the larger portion of time when the market delivers strong returns.
