Understanding the Mutual Fund Riskometer
Every mutual fund shows a riskometer. Here’s how to read the six risk levels and use them.
On this page
The riskometer is a SEBI-mandated gauge, shown on every mutual fund and its promotional material, that signals the fund’s risk level at a glance. It’s the first risk check before you invest.
The six levels
The riskometer has six bands, from lowest to highest:
- Low — e.g. overnight funds.
- Low to Moderate — many liquid/ultra-short debt funds.
- Moderate — some hybrid and medium-duration debt.
- Moderately High — many balanced/large-cap-leaning funds.
- High — most diversified equity funds.
- Very High — small-cap, sectoral/thematic and many equity funds today.
How it’s calculated
The riskometer is based on the actual portfolio — for equity, factors like market cap and volatility; for debt, credit quality and duration. Crucially, it’s reviewed monthly, so a fund’s risk level can change as its holdings change.
How to use it
- Match risk to your horizon and comfort — don’t put short-term money in a Very High fund.
- Don’t confuse risk with return — a higher riskometer isn’t a promise of higher returns.
- Read beyond it — the riskometer is a starting point; also check the category, standard deviation and the scheme document.
The riskometer tells you how bumpy the ride may be, not where it ends. Education only, not advice.
