When Playing It Safe Becomes Risky: Rethinking Risk in Equity Investing

Avoiding equity investments due to fear of volatility may feel safe in the short term, but over long horizons it often exposes investors to a different and more damaging risk: the risk of inadequate growth. While equity markets experience ups and downs, history shows that disciplined, long-term investing in equities has consistently outpaced traditional low-risk instruments like fixed deposits. The real danger lies not in market fluctuations, but in missing out on compounding growth that helps investors beat inflation and achieve long-term financial goals.

Understanding Risk in the Stock Market Beyond Daily Volatility

When most people think of risk in the stock market, they think of sudden falls, negative headlines, and portfolio drawdowns.
However, market risk is not just about short-term losses,  it is about whether your investments grow enough to meet future goals.

Volatility is a feature of equity markets, not a flaw. What matters more is time in the market, not timing the market. Over longer periods, equity markets have rewarded patience by delivering growth that compensates for interim declines.

Avoiding equity entirely may reduce visible volatility, but it increases the risk of long-term underperformance.

Market Dips Are Inevitable, Permanent Losses Are Not

Over the last 15 years, Indian equity markets have gone through multiple sharp corrections:

• 2015 – China’s Yuan Crash: Sensex fell ~5.9%

• 2016 – Demonetisation Shock: Sensex fell ~13.5%

• 2020 – Covid-19 Pandemic: Sensex fell ~13.5% in a single month

• 2024–25 – Election & Global Uncertainty: Sensex declined ~11.8%

Each of these events felt severe at the time. Yet, in every instance, markets recovered and went on to make new highs. Investors who exited due to fear often struggled to re-enter, missing the strongest phases of recovery. This is where misunderstanding risk in equity leads to costly decisions.

The Real Cost of Avoiding Equity – A Numbers Perspective

Let’s look at what disciplined investing actually delivers.

If you invested ₹10,000 per month via SIP since 2010 and earned an average return of 14%, your corpus would be approximately:

• 10 years: ~₹25 lakh

• 15 years: ~₹56 lakh

• 20 years: ~₹1.17 crore

Despite multiple market crashes during this period.

Now compare this with investing the same amount for 15 years in an FD at 6%:

• FD corpus after 15 years: ~₹30 lakh

The difference clearly highlights the long-term equity vs FD returns gap.
Avoiding equity may have reduced short-term anxiety, but it also limited wealth creation significantly.

The Hidden Risk Most Investors Ignore

India’s inflation has averaged 4–6% over long periods.
When your investment return is close to inflation, your money merely maintains purchasing power,  it does not grow meaningfully.

This makes inflation one of the most underestimated forms of market risk.
Equity, despite its volatility, has historically been one of the few asset classes capable of delivering real (inflation-adjusted) growth over long horizons.

In this context, avoiding equity can actually expose investors to greater long-term financial insecurity.

Managing Market Risk Through Discipline, Not Avoidance

The solution to market risk is not staying out of equity,  it is managing exposure intelligently.

• SIPs help average costs across market cycles

• Long-term horizons allow volatility to smooth out

• Asset allocation balances equity with stability

• Staying invested avoids emotional decision-making

Risk is not eliminated by avoiding equity; it is managed through structure, discipline, and time.

Safety Is Not the Absence of Volatility

True investment safety lies in aligning your portfolio with long-term goals, inflation realities, and time horizons.
While equity markets may test patience in the short run, history suggests that avoiding equity altogether is often the biggest risk investors take,  without realising it.