The riskometer is a visual indicator, mandated by SEBI, that shows the level of risk in a mutual fund scheme’s portfolio. You will find it on scheme documents, factsheets and advertisements.

The six risk levels

  • Low
  • Low to Moderate
  • Moderate
  • Moderately High
  • High
  • Very High

AMCs evaluate the riskometer every month based on the scheme’s actual portfolio, and any change is communicated to unitholders.

How to use it

The riskometer helps you judge whether a scheme’s risk level is in line with your own comfort. A scheme labelled “Very High” can see large swings in value, while a “Low” risk scheme is expected to be more stable, though no scheme is free of risk.

Risk and return go together. A higher risk level does not assure higher returns.

Look beyond the dial

Also read the scheme’s investment objective, asset allocation, benchmark and the Potential Risk Class (PRC) matrix for debt schemes, which shows interest rate and credit risk separately.

Disclaimer: This article is for investor education only and is not investment, tax or legal advice. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Tax rules are subject to change.