What you described is a happy case. I'm talking about a contingency fund - or similar need - where you may have to withdraw say half of it or more in one go, suddenly. Let's say you invested and six months later you need to withdraw half of it. You will be forced to swallow the loss if the market just saw a massive dip. You don't know if you will need it after six months or six years. But when you need it, you are going to immediately need it.

The answer to this - if we know it is a short term - may be "liquid funds". But thats's the thing, what if it is an unknown term you want to invest for, but you will need it when you need it. FDs come close, but FDs don't really meet inflation after factoring in taxes.

The idea here is not to maximize returns, the idea here is to minimize risk while keeping up with inflation.

Equity doesn't work for a need like this, it is the opposite. Equity assumes ability to stay in it for the long-term, because the market goes up-down-up-down with an overall eventual upward curve.