Last Updated:
Sharp swings in the stock market can significantly reduce retirement savings in a short period, especially when a large portion is invested in equity. Here’s all you need to know:
For investors nearing retirement, large exposure to equities can significantly affect the stability of their retirement corpus.
Sharp swings in the stock market can significantly reduce retirement savings in a short period, especially when a large portion of the corpus is invested in equities. The recent market declines show how volatility can impact long-term investors, particularly those approaching retirement.
How Rs 2 crore can lose Rs 22 lakh in weeks
Consider a simple example. If an investor had a Rs 2 crore retirement corpus invested in the Nifty 50 index funds on January 1, 2026, the value of that portfolio would have fallen by around Rs 22 lakh by March 13, 2026, due to the about 11% year-to-date decline in the Nifty 50.
This example shows how market corrections can quickly erode wealth when the portfolio is heavily exposed to equities.
While equity markets tend to generate higher returns over the long term, they also come with periods of volatility that can significantly impact portfolios in the short term.
Diversification also doesn’t fully protect against market falls
Even diversified portfolios have seen losses during the recent market decline. For instance, if an investor had allocated a Rs 2 crore portfolio across multiple indices, such as 60% in the Nifty 100, 20% in the Nifty Midcap 150, and 20% in the Nifty Smallcap 250.
The total corpus would still have declined by more than Rs 18.4 lakh during the same period.
This highlights that diversification across equity indices may reduce risk but cannot fully protect portfolios during broad market corrections.
Bigger portfolios face larger impact
Financial expert Vijay Maheshwari recently explained in a LinkedIn post why investors with Rs 3-4 crore portfolios should pay close attention to market volatility.
According to him, the absolute impact of market declines becomes much larger as the portfolio size grows.
For example:
A Rs 30-40 lakh portfolio could lose Rs 3-4 lakh in a 10% market fall.
A Rs 3-4 crore portfolio could lose Rs 30-50 lakh in a 10-15% market decline.
This means the financial and psychological impact of volatility increases significantly for larger portfolios.
The common mistake investors make
Maheshwari says many investors make a fundamental mistake — they treat all their money the same way. In reality, investment money can broadly be divided into two categories:
- New money, such as fresh income or SIP investments, which can take more risk.
- Old money, or wealth that has already been accumulated over years.
When markets fall, treating both types of money the same way can lead to large losses in the already accumulated wealth.
A strategy to manage volatility
To manage this risk, Maheshwari suggests a ‘Protect and Grow’ approach to portfolio allocation.
Under this strategy, around 70% of the portfolio can remain invested in growth assets such as equities, which help in long-term wealth creation.
About 30% of the portfolio should be allocated to protection assets, such as debt instruments or safer investments.
This mix helps investors participate in market growth while protecting a portion of their wealth from sharp market declines.
Wealth creation has two stages
According to Maheshwari, wealth creation typically happens in two stages.
The first stage focuses on building wealth through growth-oriented investments. The second stage focuses on protecting and steadily growing the wealth that has already been created.
Many investors successfully complete the first stage but fail to adjust their strategy for the second stage.
As a result, large portions of their retirement savings remain exposed to market volatility.
The key takeaway
Market corrections are a natural part of equity investing. However, for investors nearing retirement, large exposure to equities can significantly affect the stability of their retirement corpus.
Balancing growth investments with safer assets becomes increasingly important as the investment horizon shortens.
Failing to make this shift in strategy could result in substantial erosion of savings during market downturns.
March 13, 2026, 15:52 IST
Read More
