Introduction: Why Volatility Feels Uncomfortable – Yet Necessary
Volatility is a term that has recently dominated the minds of equity investors. Market swings, portfolio fluctuations, and changing return expectations often create uncertainty and emotional stress.
But here’s an important truth:
👉 Volatility is not a flaw of equity investing — it is the price investors pay for long-term wealth creation.
To understand this better, let us look at how equity as an asset class has performed over the past six years.
The Golden Phase: Investing During 2020–2024
If you started investing during the 2020 lockdown, your investment journey probably felt extraordinary.
The next four years resembled what many investors describe as a Midas touch period:
- Markets recovered sharply after the pandemic.
- Quality stocks delivered exceptional returns.
- Even average investments generated strong gains.
- Portfolio XIRR ranged between 24%–28% for many investors.
Apart from a brief market correction during 2022–23, the ride felt smooth and rewarding. Confidence grew, expectations rose, and many investors began believing high returns were the new normal.
Mid-2024: When Reality Returned
By mid-2024, the market narrative started changing.
Portfolio growth slowed significantly. Between 2024 and 2026, returns appeared stagnant, with average performance close to 0% growth during this phase.
For many investors, this became emotionally challenging.
Imagine seeing your portfolio XIRR fall from:
- 24%+ returns
➡️ to - 16–17% returns
Even though the portfolio was still performing well historically, the psychological impact was strong.
This phase delivered an important lesson:
There is no asset class that offers easy, quick, and permanent wealth creation.
The Truth About Equity Markets
Equity markets are not linear journeys. They move in cycles — periods of optimism followed by consolidation.
Looking ahead instead of the rear-view mirror reveals an important pattern:
Over the long term, equity returns closely follow:
- Corporate earnings growth
- Economic expansion (GDP growth)
Between 2020 and 2026:
- Corporate earnings compounded at approximately 13% annually
- The NIFTY 500 index delivered roughly similar long-term returns near 13%
This alignment is not accidental — it is how markets fundamentally function.
Why 16–17% XIRR Is Still Excellent
Even after volatility and market corrections, a portfolio delivering 16–17% XIRR means:
- You are outperforming broader market returns
- Your investments are growing faster than corporate earnings averages
- Your wealth is significantly beating inflation
In fact, equity remains one of the few asset classes capable of consistently creating real wealth over long periods.
Volatility vs. Risk: Understanding the Difference
Many investors confuse volatility with risk.
| Volatility | Real Risk |
|---|---|
| Temporary price movement | Permanent capital loss |
| Short-term discomfort | Poor financial decisions |
| Market cycles | Lack of discipline |
Volatility is temporary. Panic decisions create real risk.
The Investor’s Biggest Mistake: Looking Back Too Much
When markets slow down, investors often focus on past peak returns.
But investing is like driving:
You cannot drive safely while constantly looking at the rear-view mirror.
Successful investors focus on:
- Long-term earnings growth
- Economic trends
- Asset allocation discipline
Outlook for 2026 and Beyond
The earnings outlook for 2026 and 2027 remains positive. As corporate profits expand and economic growth continues, equity markets historically resume their upward trajectory.
Market phases change — but long-term compounding continues.
The journey ahead remains long, and the ride is likely to become enjoyable again.
What Should Investors Do During Volatility?
The answer is simple — yet difficult emotionally:
✔ Stay Invested
Avoid interrupting compounding.
✔ Trust the Process
Markets reward patience, not timing.
✔ Focus on Goals, Not Daily Returns
Financial goals matter more than short-term fluctuations.
✔ Maintain Discipline
Systematic investing works best during uncertain periods.
Conclusion: Don’t Abort the Journey
Volatility is uncomfortable, but it is also essential.
Every successful long-term investor eventually understands that:
Wealth is not created during smooth markets — it is created by staying invested during uncertain ones.
If your portfolio continues compounding at healthy long-term rates, you are already on the right path.
The journey continues.
The markets will evolve.
And patience remains the investor’s greatest advantage.
Wait. Stay invested. Do not abort the journey.