Better returns than FDs with zero risk! Amidst a falling market, these SBI schemes will yield handsome profits..

SBI Mutual Fund Schemes: During periods of stock market decline or a downturn, the biggest question facing both new and seasoned investors is what to do. How can one capitalize on this situation to safely grow their money over the next 1 to 2 years? Investors often panic when they see a market drop or, driven by the lure of quick, high returns, hastily invest lump sums into risky funds like small-cap funds.

However, market veterans and portfolio managers strongly advise against this strategy. Experts clearly believe that placing large bets on small-cap funds for a short horizon of less than 3 years (specifically 1–2 years) during a market correction can be risky.

'India's economy is stronger than the rest of the world!' – Former ECB Chief Trichet makes a bold claim amidst global uncertainty.

Portfolio strategists point out that "during times of market uncertainty, 'capital protection' is far more important than merely chasing high returns over a short period like 1–2 years. In such times, investing in a phased manner through diversified asset allocation or hybrid funds is the most prudent formula for wealth protection and growth."

3 SBI Mutual Fund schemes best suited for a 1-to-2-year horizon

If your investment horizon is limited to the next 12 to 24 months and you wish to benefit from a market recovery, these SBI schemes could prove to be excellent choices:

1. SBI Multi Asset Allocation Fund (Risk: Low to Moderate)

This fund does not rely solely on the stock market for your capital. It invests by distributing funds primarily across equity, debt (bonds/fixed deposits), and gold/silver. Why is it best for a 1–2 year horizon? History shows that during stock market downturns or sluggish phases, gold and debt assets provide stability to a portfolio. Over a period of 1–2 years, this fund has the potential to deliver stable and balanced returns of 10% to 12% while offering complete protection against market volatility.

2. SBI Equity Hybrid Fund (Risk: Moderate)

It operates on a conservative hybrid model, where approximately 65% ​​to 80% of the total fund is invested in equities, and the remaining 20% ​​to 35% is allocated to debt securities (such as G-Secs and bonds).

A major advantage of investing when the market is at a low point is that the fund's equity component acquires strong stocks at attractive valuations. As the market recovers over the next 1–2 years, the equity portion will drive rapid returns, while the debt component will provide stability to the portfolio during any downturns.

3. SBI Arbitrage Opportunities Fund (Risk: Very Low / Safe as an FD)

This fund is not dependent on stock market rallies or corrections. It generates risk-free returns by capitalizing on price differentials between the cash market and the derivatives market.

If your primary goal is zero risk and you seek returns that are better than a bank Fixed Deposit (FD) and tax-efficient, this fund is the safest option. Over a 1–2 year period, the risk of capital loss is negligible.

If you can tolerate some risk, adopt an 'STP' strategy

If you wish to capitalize on the current market dip and benefit from the anticipated rally over the next 1–2 years, consider using the STP (Systematic Transfer Plan) route instead of a lump-sum investment. First, invest your entire corpus as a lump sum in the SBI Arbitrage Fund or SBI Liquid Fund. Arrange for a fixed amount to be transferred monthly (via STP) from there into the SBI Flexicap Fund or SBI Bluechip Fund. This will allow you to reap the significant benefits of 'cost averaging' during market dips over the next 12 to 18 months.

Avoid investing in these schemes for a tenure of just 1–2 years!

SBI Small Cap Fund: Small-cap companies experience extreme volatility during market downturns. Recovery in these funds can take anywhere from 3 to 5 years.

SBI Contra Fund & SBI Focused Equity Fund: These funds operate on specific strategies and require a longer timeframe—at least 5 to 7 years—to demonstrate their performance.

Overall, for a short-to-medium term of 1–2 years, the SBI Multi Asset Allocation Fund or the SBI Flexicap Fund (via STP) would prove to be the smartest and safest options.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.