SIP investment choices to suit your risk appetite in FY26

As we settle into FY2025-26, investors are understandably cautious. While the broader equity markets remain buoyant, thanks to a growth-oriented Union Budget and improving domestic fundamentals, market volatility continues to nudge investors to revisit their strategies—especially those investing through Systematic Investment Plans (SIPs). Here’s a quick guide to navigating this landscape, whether you’re a conservative, moderate, or aggressive investor.

Conservative investors: Safety first, with a hint of growth

For those who prioritise stability over high returns, options such as debt mutual funds, liquid funds, and short-term or ultra-short-term funds may continue to serve as solid investment choices in 2025. Conservative investors can also explore hybrid or balanced funds that offer a blend of equity and debt—striking a balance between growth and stability.

To further shield their portfolios, many investors are also turning to diversification across asset classes. Allocating a small portion to gold ETFs or gold savings funds, for instance, may act as a hedge during market downturns.

Moderate investors: riding the stability wave

Moderate investors seeking a balance between risk and return could look at large-cap equity funds which tend to provide relatively steady growth with lower volatility. Another attractive category in this segment is dynamic asset allocation funds, which intelligently switch between equity and debt depending on market conditions.

These funds allow investors to stay invested in equities while benefiting from a layer of risk management. In an uncertain market, this flexibility could be a smart move.

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Aggressive investors: High risk, high reward

If you’re an investor with a high-risk appetite, mid-cap and small-cap funds could still be promising. While these categories carry increased volatility, they also have the potential to deliver stronger returns over the long term—especially when the economy is on a recovery and expansion path.Aggressive investors could also consider sectoral or thematic funds that align with emerging trends such as technology, manufacturing, or energy transition. Additionally, exposure to international or emerging market funds might help diversify geographically and tap into global growth stories.Regardless of the risk profile, SIPs remain an effective tool to manage market swings through rupee cost averaging. More importantly, staying invested over the long term is key. Compounding rewards patience—and time in the market always beats timing the market.

Equity market outlook: Calm amidst the currents

Although the equity markets staged a recovery in March 2025, this can result in volatility, as the Trump’s administration has imposed counter tariffs on most countries exporting to the USA. The counter tariffs are in general inflationary for the USA, and this might force the US Fed to delay the interest rate cut till the inflation cools to below 2.5%.

The slowing economic conditions, the sticky inflation and higher interest rate could lead the US economy to slip into recession. The US equity markets may remain volatile in the short to medium term due to lower earnings growth and shrinking margins of the corporates. The valuations are expected to adjust to lower levels. Sticky inflation and delayed interest rate cut might result in DXY (U.S. Dollar Index) remain elevated, impacting the treasury yield to remain elevated

However, with the Union Budget 2025 steering clear of any negative surprises on capital gains and the potential personal tax reliefs increasing disposable incomes, investor sentiment has remained upbeat. Higher retail savings may lead to an uptick in SIP flows, offering steady support to equity markets.

That said, global cues, geopolitical developments, and monetary policies are expected to continue to shape short-term movements.

Final word

In volatile markets, clarity and consistency are your allies. Whether you’re cautious, balanced, or growth-oriented, aligning your investment strategy with your financial goals and risk profile is the key. Keep SIPs running, diversify smartly, and stay focused on the long term. The current market conditions may offer investors an opportunity to add gradually and average out their investments. This phase could also be a favourable time for new investors to begin their investment journey.

(The author Deepak Ramaraju is Senior Fund Manager, Shriram AMC. Views are own)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)