Riskometer of Mutual Funds: Why It Matters
- When considering mutual funds, investors frequently enough focus on potential returns.
- The riskometer is a visual representation of the risk associated with a particular mutual fund scheme.As per regulatory guidelines, all mutual fund schemes are required to display this...
- The riskometer categorizes funds into six distinct levels, each representing a different degree of risk.
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Decoding the Mutual Fund Riskometer: A Guide for investors
Table of Contents
Published August 23, 2025
Beyond Returns: Why Risk Assessment Matters
When considering mutual funds, investors frequently enough focus on potential returns. However, a truly informed decision requires a thorough understanding of the associated risks. The Riskometer, introduced by the Securities and Exchange Board of India (SEBI),is a crucial tool designed to help investors navigate this complexity.
What is a Mutual Fund Riskometer?
The riskometer is a visual representation of the risk associated with a particular mutual fund scheme.As per regulatory guidelines, all mutual fund schemes are required to display this riskometer prominently in official documents – including the scheme information document (SID), key information memorandum (KIM), and any promotional materials – ensuring investors have clear access to this vital information.
understanding the risk Levels
The riskometer categorizes funds into six distinct levels, each representing a different degree of risk. Here’s a breakdown:
| Risk level | Description | Suitable For | Example Funds |
|---|---|---|---|
| Low Risk | Minimal risk, typically with lower returns. | Investors seeking capital preservation. | Overnight funds, arbitrage funds |
| Low to Moderate Risk | Suitable for medium to long-term investors with a small risk appetite. | Conservative investors with a moderate time horizon. | Ultra short duration funds, money market funds |
| Moderate Risk | Offers slightly higher returns with a moderate level of risk. | Investors cozy with some market fluctuations. | Medium term funds, corporate bond funds, banking and PSU funds |
| Moderately High Risk |