Short-Term Losses vs Long-Term Gains - How to Judge Investments Correctly

You checked your mutual fund portfolio last month. It was down 8%. You felt that familiar knot in your stomach. "Should I pull out before it gets worse?"

We hear this question almost daily in our WhatsApp community of NRIs. The truth is, most investors judge their portfolios like they're checking cricket scores. They want to see green numbers every time they log in.

But that's not how wealth works.

At Belong, we've spent years helping NRIs understand one critical fact: short-term losses are the admission price to long-term wealth. 

This guide will show you exactly how to judge your investments without the panic, using real data and practical frameworks that work for NRIs living in the UAE and beyond.

Why Your Portfolio Shows Red Numbers (And Why That's Normal)

Markets don't move in straight lines. They zigzag, correct, crash, and recover.

Consider what happened in 2024-25. The Nifty 50 went through its longest monthly losing streak in 30 years, falling 15% from its September 2024 highs. Lakhs of SIPs were cancelled. First-time investors who had only seen markets go up suddenly saw their portfolios turn red.

Here's what actually happened next: Markets recovered. They always do.

The problem isn't the market. The problem is how we measure success. Checking your portfolio daily is like weighing yourself every hour while dieting. 

The number fluctuates constantly, but the trend over months is what matters.

👉 Tip: Set a rule for yourself. Check your investment portfolio only once a quarter. More frequent checks lead to emotional decisions.

The Psychology Trap: Why We Panic at the Wrong Time

Behavioral finance has a name for this: loss aversion. Research shows investors feel the pain of losses twice as intensely as the pleasure of equivalent gains.

This means a 10% loss feels as painful as a 20% gain feels good. Your brain isn't wired for investing. It's wired for survival. And survival instincts scream "run" when you see red numbers.

What happens when investors act on this instinct?

They sell at the bottom and buy at the top. They lock in losses that would have recovered. They miss the best days in the market, which often come right after the worst days.

In February 2025, mutual fund inflows in India hit a 10-month low, with equity inflows dropping 26% month-on-month. Investors were fleeing precisely when they should have been buying.

What the Data Actually Says About Long-Term Returns

Let's look at hard numbers. The Nifty 50 has delivered approximately 12% CAGR over 20-year periods. Here's what's remarkable: over every 15-year period on record, the index has never delivered negative returns.

Source: NSE historical data, BMS Money analysis

Notice how the range narrows as time extends? That's the magic of time in the market. Short-term outcomes are unpredictable. Long-term outcomes are remarkably consistent.

The 30-year return figure stands at 12.05% CAGR. That's doubling your money roughly every six years. But only if you stayed invested through all the corrections, crashes, and chaos.

👉 Tip: Use Belong's tools to compare your investment options side by side. Sometimes seeing the data makes staying invested easier.

The NRI Angle: Currency Adds Another Layer

Here's something most articles miss. As an NRI, your investment returns have two components: the asset return and the currency movement.

The Indian rupee has depreciated by roughly 3-4% annually against the US dollar over the past 20 years. In 2025 alone, it fell by approximately 6%, breaching the 90 mark.

What does this mean for you?

If your INR investments earn 12% and the rupee depreciates 4%, your real return in dollar terms is closer to 8%. Still good. But lower than the headline number suggests.

This is precisely why many NRIs we work with at Belong are exploring USD-denominated investments in GIFT City. When your returns are in dollars, you eliminate currency risk entirely.

This comparison is illustrative. Actual returns vary.

The math often favors keeping some portion of your portfolio in USD, especially for NRIs planning to stay abroad or retire outside India.

How to Actually Judge Your Investments

Stop judging based on this month's return. Here's a better framework.

1. Measure Against Your Goals, Not the Market

If you're investing for retirement 15 years away, a 10% drop this quarter is noise. Your question shouldn't be "how did my portfolio do this month?" It should be "am I still on track for my goal?"

2. Compare to Appropriate Benchmarks

A large-cap fund should be compared to Nifty 50. A mid-cap fund to Nifty Midcap 150. Comparing your equity fund to an FD rate is comparing mangoes to cars.

3. Evaluate Rolling Returns, Not Point-to-Point

One-year returns depend heavily on your start and end dates. Rolling returns show how an investment has performed across all possible holding periods.

4. Factor in Taxes Before Comparing

As an NRI, your mutual fund gains are taxed differently than a resident Indian's. Short-term capital gains (under 12 months) on equity are taxed at 20%. Long-term gains above Rs 1.25 lakh are taxed at 12.5%.

This tax difference alone is a reason to stay invested longer. Every time you redeem early, you're potentially paying higher taxes.

👉 Tip: Before selling any investment, calculate the after-tax return. Often, staying invested just a few more months can save you significant tax.

The Real Cost of Short-Term Thinking

Let's make this concrete. Imagine you invested Rs 10 lakh in January 2020, right before COVID crashed the markets.

By March 2020, your investment was down to Rs 6.5 lakh. A 35% loss. If you panicked and sold, you locked in that loss.

If you stayed invested, by December 2021, your Rs 10 lakh had grown to approximately Rs 16 lakh. The same investment. Two completely different outcomes based solely on behavior.

Redemptions from equity funds increased by 40% to Rs 4,645 billion in 2024. Many of those investors will spend years trying to recover what they lost by selling at the wrong time.

The market has never failed investors who stayed invested for 15+ years. It has repeatedly punished those who tried to time it.

When Should You Actually Sell?

Not all selling is panic selling. There are legitimate reasons to exit an investment.

Sell When:

Your goal is achieved. If you invested for a house down payment and you've hit your target, take the money.

The fund has fundamentally changed. If your large-cap fund suddenly becomes a mid-cap fund, or the fund manager changes, reassess.

You need portfolio rebalancing. If your equity allocation has grown from 60% to 80% of your portfolio, trimming makes sense.

The tax situation warrants it. Harvesting losses at year-end can offset gains and reduce your tax bill.

Don't Sell When:

Markets are crashing. That's usually the worst time.

You're reacting to news headlines. By the time you read about it, the market has already priced it in.

You need the money in 6 months. You should never have been in equity in the first place.

👉 Tip: Write down your reasons before investing. When markets drop, read those reasons again. If nothing has changed about your goals, nothing should change about your investments.

Building a Portfolio That Lets You Sleep at Night

The best portfolio isn't the one with the highest return. It's the one you can actually stick with.

If seeing red numbers makes you lose sleep, you have too much equity. If you're checking prices daily, you're probably over-invested.

Here's a simple framework we share with NRIs in our community:

Money needed in 0-3 years: Keep in FDs or liquid funds. No exceptions. Compare NRI FD rates here.

Money needed in 3-7 years: Mix of debt funds and conservative hybrid funds. Maybe 30-40% equity maximum.

Money needed in 7+ years: Equity-heavy allocation makes sense. But only if you truly won't need the money.

Emergency fund: 6-12 months of expenses in easily accessible form. This money should never be invested in anything volatile.

For NRIs specifically, GIFT City investments offer a compelling option. USD-denominated, tax-efficient, and regulated by IFSCA. You can explore options like mutual funds in GIFT City that provide exposure to Indian and global markets without currency risk.

The Power of Systematic Investing During Downturns

SIPs weren't designed for convenience. They were designed for exactly these moments.

When markets fall, your SIP buys more units at lower prices. When markets rise, you benefit from the larger unit count. This is rupee cost averaging in action.

The math is counterintuitive. A falling market is actually good for someone who is still in the accumulation phase. You want to buy more units cheaply.

Research shows that SIP investors who continued through the 2008 crash, the 2020 crash, and every other correction have significantly better outcomes than those who stopped and started based on market conditions.

The biggest mistake? Cancelling your SIP when markets fall. That's the equivalent of stopping your shopping spree when everything goes on sale.

👉 Tip: Set up your SIPs and forget about them. Automate the investment. Remove yourself from the decision loop. Start a SIP as an NRI here.

What About Timing the Market?

Here's a confession. After 12 years in finance, we still can't time the market. Neither can most fund managers. Neither can the experts on TV.

Study after study shows that missing just the 10 best days in a decade can cut your returns by half. And those best days often come immediately after the worst days. You can't capture one without enduring the other.

The investor who tried to time the market by staying out during "bad times" almost always underperforms the investor who just stayed put.

Our advice? Time in the market beats timing the market. Every single time.

Practical Steps for NRIs

Let's get specific. Here's what you should do this week:

1. Audit your current investments

List everything. FDs, mutual funds, stocks, real estate. Calculate what percentage is in each asset class.

2. Define your time horizon for each goal

Retirement in 20 years? Kid's education in 10 years? Emergency fund now? Each needs different treatment.

3. Check your NRI account status

Are you using the right accounts? NRE vs NRO matters for taxation and repatriation. Make sure your residential status is correctly reflected.

4. Review your tax situation

Understand DTAA benefits between India and UAE. You might be eligible for relief you're not claiming.

5. Set realistic expectations

Equity can fall 30-40% in any given year. If that would cause you to sell, reduce your equity allocation now while you're thinking clearly.

The Belong Approach to Long-Term Investing

At Belong, we built our entire platform around the principle that NRIs need stable, tax-efficient options for their India investments.

That's why we focus on GIFT City products. USD-denominated fixed deposits that remove currency risk. Mutual funds with zero capital gains tax for NRIs. All regulated, all compliant, all accessible from your phone.

We're not saying equity is bad. We're saying your portfolio needs balance. And sometimes the best move during market volatility is having a portion of your wealth in something stable.

Options like the DSP Global Equity Fund or Tata India Dynamic Equity Fund available through GIFT City give you equity exposure without the tax burden that Indian-domiciled funds carry for NRIs.

Conclusion

Markets will fall. Your portfolio will show red. News channels will scream about crashes. None of that changes the fundamental truth: time in the market creates wealth. Timing the market destroys it.

The next time you see your portfolio down 10%, remember this: every investor who stayed invested in Indian markets for 15+ years has made money. Every single one.

Your job isn't to predict markets. It's to stay invested long enough for the math to work in your favor.

Want to discuss your specific situation? Join our NRI WhatsApp community where thousands of NRIs share insights, ask questions, and learn together.

Ready to explore tax-efficient investment options? Download the Belong app and see what's possible.

Sources:

1. NSE India - Historical Data: https://www.niftyindices.com/reports/historical-data
2. BMS Money - Nifty Performance Analysis: https://bmsmoney.com/article/full/decades-of-nifty-50-performance-a-comprehensive-analysis-of-returns-from-1991-to-2024/
3. Business Standard - Equity Fund Redemptions 2024: https://www.business-standard.com/finance/personal-finance/redemptions-from-equity-funds-increase-by-40-to-rs-4-645-billion-in-2024-125011400395_1.html
4. The CapTable - MF Industry Report 2025: https://the-captable.com/2025/03/india-stock-market-nifty-mutual-fund-inflows/
5. Bajaj AMC - Market Crash Impact: https://www.bajajamc.com/knowledge-centre/how-market-crashes-impact-mutual-fund
6. Upstox - Rupee Depreciation Impact: https://upstox.com/news/personal-finance/latest-updates/impact-of-falling-rupee-against-us-dollar-on-personal-finance-how-it-affects-investments-travel-education/article-150977/
7. Finnovate - Mutual Fund Taxation FY 2025-26: https://www.finnovate.in/learn/blog/mutual-fund-taxation-india-fy-2025-26
8. ICICI Direct - USD INR Exchange Rate Impact: https://www.icicidirect.com/research/equity/finace/impact-of-usd-inr-exchange-rates-on-indian-markets