Summary of this article
After 7 years, equities almost never lose money.
Over 7+ years, Nifty 50 TRI delivered 10%+ returns 84% of the time.
On average, money doubles in 6–7 years, triples in 10–11 years, and quadruples in 12–13 years.
‘Invest in equities for the long term. They tend to be volatile in the short term.’ Every investor must have heard this countless times. But what is the exact definition of long-term? Is it five years, seven years, 10 years, or longer? What difference does it make if an investor invests for the long term? And what really changes when you stretch your investment horizon? Does it increase returns, reduce volatility, or both?
Funds India performed a detailed study on how equities perform over the long term. The key takeaway of the study is that the longer your horizon, the lower your chances of experiencing negative returns.
Funds India analysed the historical performance of the Nifty 50 index since its launch on June 30, 1999. The benchmark index Nifty 50 represents the 50 largest companies of the country.
Longer the time frame, the lower the odds of negative returns
As per the study, 23 per cent of the time, Nifty 50 has earned negative returns for investors in the one-year period. The instances of negative returns, as per the data, however, fell sharply to 6 per cent as tenure was increased to three years. Over a 7-year period or longer, the chances of negative returns became negligible.
In fact, the longer the time frame, the higher the chances of earning better returns. Going by the Funds India study, Nifty 50 has given over 10 per cent returns, 84 per cent of the time over the 7-year period since its inception.
Chances of 7 per cent returns or higher were as high as 98 per cent over the 7-year period. The chart clearly shows how the odds of earning higher returns rise as the investment horizon increases.
How much returns can you earn over a 7-year period?
Nifty 50 companies have given an average of 15 per cent returns over any 7-year period since their launch. The highest that the index has delivered over a 7-year period since its inception was 30 per cent, and the lowest return stood at 5 per cent. However, not even once did the index fall into the negative territory.
The table below shows the historical performance of the Nifty 50 index over different time periods since its inception.
According to the study's findings, historically, the Indian equities (Nifty 50) have doubled investors’ money 74 per cent of the time in 6-7 years. A few more interesting observations from the study are as follows:
Indian equities have tripled investors’ money 80 per cent of the time in 10-11 years.
76 per cent of the time, Indian equities have multiplied investors’ money 4 times in 12-13 years.
In most instances, a 7-year time frame increases the odds of over 10 per cent returns. In rare instances where returns were lower than 10 per cent, extending the time frame by 1-2 years helps.
On average, your money is multiplied more than 2 times over 7+ Years (Nifty 50 TRI).
To sum up, the data shows how time does the heavy lifting in equities. Investors should stay invested long enough, and the odds steadily shift from uncertainty to decent returns, turning patience into real performance.
