Since 2013, SEBI has been trying to police the way mutual funds are being presented to the investors, trying to make it increasingly transparent. At first, there were the color-coded risk-profilers that came along with the mutual funds. But in 2015, SEBI probably thought the investors were having to indulge in a lot of logical reasoning trying to match the colours with the risk profiles, and thus introduced the Riskometer.
A standard Riskometer is a mandate for every fund house and looks like your car’s speedometer with a compass like arrow pointing to the level of risk exposure of the particular fund. It measures the risk your principal amount is exposed to in a varying scale of low to high. Of course, the arrow moving rapidly towards the right of your car speedometer is much riskier than the same on your mutual fund Riskometer.
A Riskometer is depicted as below-
Let us see what each section depicts in brief
As an investor, we maintain that it is very imperative that your risk appetite and your investment horizon align with your overall financial goals. Your portfolio must have a healthy mix of investments pertaining to various risk profiles but having said that, it is advisable to not go out of your comfort zone. If you are a risk averse investor, we’d suggest you maintain your investments in low risk and moderately low risk investments while keeping distance from equity. For more such constructive advice on your portfolio, you may get in touch with our financial advisers at Truemind Capital. We consult for you to have a better and safer future!