Riskometer

The riskometer is a simple gauge SEBI requires on every scheme, so you can see at a glance how much risk it carries. It has six levels: Low, Low to Moderate, Moderate, Moderately High, High, and Very High.

How to read it

The riskometer is a dial, like a speedometer, pointing at one of the six levels. A liquid fund sits near Low; a diversified equity fund around Very High; a small-cap fund firmly at Very High. It is a quick, standardised way to compare the risk of very different schemes, and SEBI mandates it on scheme documents and marketing so no fund can hide how bumpy it may be.

What it does, and does not, tell you

The riskometer shows the kind of ride, not the destination. A high reading does not mean high returns, and a low reading does not mean a good deal; it only signals how much the value may swing. It is also not fixed: funds must review it regularly and update it as their holdings change, so a scheme can move up or down the dial over time.

Using it well

Match the riskometer to your horizon and nerves, not to the return you hope for. A Very High fund can be right for long-term money you will not touch for years, and wrong for money you need soon, however good its past looks. Pair it with the risk and return basics before deciding.