Market has hardly given any return for almost two years. What Do We Do Now?
Over the last few months, we have been hearing this more and more.
“Market has hardly given any return for almost two years. Had this money been invested somewhere else, like an FD, at least there would have been some return.”
And sometimes even further:
“Last year also I wanted to move out. You asked me to continue. See, had I moved then, I would have earned something in FD by now.”
We can understand the concern. And the frustration too.
For many investors, this is probably the first time in their journey that markets have just sat there for so long without rewarding patience. A few months of correction is manageable. Even one bad year, most people somehow cope with. But when almost two years go by and the portfolio is still around the same level ,or lower in some cases, the question starts changing.
Was staying invested, or investing in equity itself, a wrong decision?
And that is when the comparison with FDs and other fixed-return products naturally comes up.
First, the investor is not entirely wrong
If we only look at the last two years, there is no point denying that the comparison has some merit. The Nifty 50 was around 26,000 in late September 2024 and was still below that level in September 2026. So someone who entered around the 2024 highs can genuinely say that almost two years have passed and the index itself is still below where it was. Meanwhile, an FD or another fixed-return product would have delivered a positive return during the same period. So if the question is simply:
“Would an FD or some other fixed-return product have been a better option during these two years?”
In many cases, yes. But that is not really the decision we have to make today.
The actual question is:
Does this mean a long-term equity investor should now move to some other product, just because the last two years have been disappointing?
That is a very different question.
Why was this money invested in equity in the first place?
This is probably the first question we should ask. If the money was needed in two years, then honestly, equity may not have been the right place for it from the beginning. For short-term money, certainty matters more. An FD or something lower-volatility would probably have made more sense. But suppose the investment was made for seven years, ten years or longer. Has that time horizon changed?
If not, then the fact that two years have been poor does not automatically change the role of that money.
The problem with expecting a “normal” return every year
When we say that equity has historically delivered, say, 12–14% over long periods, many of us unconsciously start expecting something vaguely similar every year. But that is not how returns actually come. Some years are very good. Some are average. Some are negative. And sometimes markets do very little for quite a long stretch. The final CAGR we see after 10 or 15 years is simply the combined result of all these very different years.
For example, in the Nifty 50 TRI, some calendar years delivered extraordinary returns:
2003: 76.6%
2005: 38.6%
2006: 41.9%
2007: 56.8%
2009: 77.6%
The important point is not just that these years gave high returns. The more important point is this:
Nobody knew at the beginning of those years that they were going to be among the best years.
We know it now because they are already behind us.
What happens if we miss just a few of those years?
This is where the issue becomes much more serious.
If we take Nifty 50 TRI calendar-year returns from 2000 to 2024, the compounded return works out to about 13.2% per annum. Now keep the same 25-year period, but assume the investor missed only the five best calendar years — 2003, 2005, 2006, 2007 and 2009 — and earned zero return in those five years.
The CAGR drops to roughly 3.4%.
The cost of missing the best years
Scenario | CAGR |
Stayed invested | 13.23% |
Missed 5 best years | 3.41% |
The difference looks even bigger when converted into money.
₹1 lakh compounding through the complete period would have become roughly ₹22.4 lakh.
Without those five best years, it would have grown to only around ₹2.3 lakh.
Just five missed years out of a 25-year period (still stayed invested for 20 years) changed the outcome that much.
This is obviously only an illustration. Nobody deliberately decides that they will stay out only five best years. But that is exactly the problem.
We do not know which years will turn out to be the best ones until they are already over.
And that is why the thought of moving out of equity now and coming back later “when things improve” sounds much easier than it actually is.
Coming back is the difficult part
Suppose an investor moves to some other fixed-return product today and decides to come back to equity once the market starts doing well again.
Fair enough. Sounds very good.
But what exactly would tell us that the market has started doing well again?
A 5% rise? 10%? A new high? Three good months?
By the time the market again starts looking comfortable, a reasonable part of the recovery may already have happened.
For example on 1 January 2021, nobody knew that small caps were going to deliver more than 60% over the next twelve months. That is the point. A strong five-year or ten-year CAGR is often not built by getting a decent return every single year. Sometimes one or two very strong phases do a lot of the work.
We have seen long flat periods before
There is another historical observation worth noting.
A study by Edelweiss Mutual Fund looked at 11 earlier instances since 2001 when the Nifty had delivered little or no return over a two-year period.
In all those instances:
the following one-year return was positive, ranging from roughly 5% to 50%
the subsequent three-year annualised returns were also positive, ranging from around 7% to 40%
This is not a forecast. It does not mean that because the market has been flat for two years, the next three years must now be good. Markets do not work according to such formulas.
But what this history tells us is that Periods like the present one are not unusual. And historically, moving out after a long dull phase has not always turned out to be a good decision.
This does not mean just stay invested and forget everything
A portfolio still needs review. Maybe the investor is carrying more equity than he or she is actually comfortable with. Maybe the money is now required earlier than originally planned. Maybe a particular fund has a genuine problem and needs to be changed. Maybe the original allocation was too aggressive. Or perhaps the investor has now realised, after actually experiencing a prolonged weak market, that the earlier he overestimated his risk appetite.
All of these are valid reasons to review and make changes.
But “other fixed-return products have done better recently” is a different argument.
This alone may not be enough reason to move long-term money out of equity today.
There is nothing wrong with “safer” products
This is also important.
The point here is not that equity is good and FD is bad. An FD is doing exactly what it is supposed to do. It offers predictability, visibility and much lower volatility. For many financial requirements, that is exactly what is needed. The problem begins when we try to keep shifting between the two depending on what has performed better recently.
In theory, it sounds sensible. In practice, it means repeatedly trying to identify when to exit and when to re-enter.
And getting both decisions right consistently is extremely difficult.
So what would we do today?
If a long-term investor comes to us today with this concern, we would certainly not dismiss it.
Almost two years without meaningful returns is long enough to test anyone’s patience.
We would review the portfolio. We would review the time horizon. And we would review whether the current equity allocation is still suitable for that investor.
If something has genuinely changed, the portfolio should change accordingly.
But if the goal, time horizon and overall allocation are still broadly the same, we would be very careful about changing a long-term strategy only because the recent two-year return has been poor.
The comparison is understandable. The frustration is understandable too. But the decision we take today has to be based on what makes sense from today onwards, not only on what would have worked better over the last two years.
And perhaps that is the most difficult part of investing:
The best periods are always very easy to identify after they have already happened.