Equity Returns Reality Check: Why 12% May Be Misleading The widely cited 12% annual equity return target is a long-term average, not a guaranteed yearly outcome. Nifty 50's 13.6% CAGR over 35 years masks significant volatility and sequence risk. A SIP started in January 2012 delivered only 9% annually over five years but 12% over seven years, illustrating how timing and holding periods dramatically affect results. Studies reveal a five percentage point gap between fund returns and actual investor returns due to behavioral decisions. Historical data shows Nifty 50 SIPs experienced 65% declines in single-year periods, yet remained positive over ten-year horizons. Importantly, returns have declined over time—seven-year SIPs that averaged 30% annually in the early 2000s now deliver around 15%.
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