Mutual Fund Riskometer

The riskometer is a visual scale that indicates the risk associated with a mutual fund scheme based on the scheme characteristics. 

What is a Riskometer?

The riskometer is a scale that helps investors gauge the level of investment risk in a particular mutual fund scheme. It simplifies risk profiling by assigning a standard risk label to each scheme. With six levels on the scale, it aids in analysing a mutual fund scheme’s risk profile, ensuring better risk-based investing decisions. 

How Does a Mutual Fund Riskometer Work?

The riskometer shall have the following six levels of risks for mutual fund schemes, from low to very high. 

Different Levels of a Risk-o-Meter

Risk Level

Principal (Invested Amount)

Low 

At low risk

Low to Moderate

At moderately low risk

Moderate

At moderate risk

Moderately High

At moderately high risk

High

At high risk

Very High

At very high risk

To understand how risky a mutual fund scheme is, you can check the riskometer of the scheme. An example of the riskometer for a ‘Very High’ risk scheme is shown below:

Risk-o-Meter’s Risk Labelling for Existing and New Funds

Any change in risk-o-meter shall be communicated by way of Notice cum Addendum and by way of an e-mail or SMS to unit holders of the mutual fund scheme.As per SEBI guidelines, Risk-o-meter  shall  be  evaluated  on  a  monthly  basis  and  Mutual Funds/AMCs  shall disclose the Risk-o-meter along  with  portfolio disclosure for  all  their  schemes on  their respective  website and  on AMFI website within 10 days from the close of each month.

Types of Risk Factors

The types of risks in different types of mutual funds in the riskometer are as follows:

a) Standard Risk Factors:

  • Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. 
  • As the price/ value/ interest rates of the securities in which the Scheme invests fluctuates, the value of your investment in the Scheme may go up or down depending on the various factors and forces affecting the capital markets and money markets.  
  • Past performance of the Sponsors and their affiliates / AMC / Mutual Fund does not guarantee future performance of the Scheme of the Mutual Fund.
  • The name of the Scheme does not in any manner indicate either the quality of the Scheme or its future prospects and returns.  
  • The Sponsors are not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of ₹1 lakh each made by them towards setting up the Fund.  
  • The scheme is not a guaranteed or assured return Scheme

b) Specific Risk Factors:

These are risk factors that are specific to categories of schemes:
For example,
Risks associated with investment in equities:
1. Risk of losing invested money/Principal: Investments in equities/stocks involve a degree of risk and you should not invest in the equity schemes unless you can afford to take the risk of possible loss of invested amount/principal.

2. Sector specific Risk/Industry specific Risk: Stock prices can go up or down due to sector/industry specific events. Mutual funds that invest in these stocks also carry the same risk.

Currently we have only covered a few of the risk factors associated with investment in equities. Apart from these risk factors, there are a number of other risk factors associated with debt schemes too. You can read more about these risk factors here.

How Do Risk-o-Meter Help Investors?

The riskometer helps investors by clearly showing the level of risk associated with each mutual fund, allowing them to choose the mutual fund scheme  that matches their financial goals and risk appetite. For example, conservative investors may identify low-risk funds, while aggressive investors may explore high-risk options. 

It supports risk-based investing by offering a quick snapshot of a mutual fund scheme’s risk profile. This may improve the  decision-making and may encourage investors to align their choices with their investment objectives.


Conclusion 

The riskometer helps investors understand the risk attached to different mutual fund schemes, acting as a valuable risk indicator. It simplifies risk-based investing by showing where a fund stands on the risk spectrum. 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.

Published on Apr 30, 2025

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