Riskometer: how SEBI labels mutual fund risk
Six levels, reviewed every month, printed wherever performance is shown.
The riskometer is the dial-shaped picture printed on every mutual fund scheme's documents and advertisements that shows its level of risk. SEBI requires it as part of product labelling, and the needle points to one of six levels, from Low to Very High.
It is a label about the portfolio, not a forecast of returns or a guarantee against loss. A Low risk scheme can still fall in value; it is simply lower on SEBI's scale than the others.
The six risk levels
Exactly as listed in SEBI's Master Circular for Mutual Funds.
| Level | Name |
|---|---|
| 1 | Low risk |
| 2 | Low to Moderate risk |
| 3 | Moderate risk |
| 4 | Moderately High risk |
| 5 | High risk |
| 6 | Very High risk |
How a scheme's level is set and kept current
- 1
1. At launch
The AMC assigns a risk level based on the scheme's characteristics before the New Fund Offer.
- 2
2. Every month
The level is evaluated again from the actual portfolio, using the risk value method SEBI prescribes.
- 3
3. Within 10 days
The riskometer is published with the monthly portfolio on the AMC's website and AMFI's website within 10 days from the close of each month.
- 4
4. If it changes
Unitholders are told through a notice cum addendum and by e-mail or SMS.
- 5
5. Once a year
The AMC discloses each scheme's risk level as on 31 March and the number of times it changed during the year, and the annual report shows the level at the start and end of the year.
Where the riskometer must appear
- check_circleWherever a scheme's performance is shown, including promotional material, alongside the scheme's riskometer.
- check_circleWherever performance is compared with the benchmark, the benchmark's riskometer too.
- check_circleThe benchmark's riskometer on the front page of the application form, the Scheme Information Document and the Key Information Memorandum.
- check_circleWith a disclaimer that investors should consult their financial adviser if they are unsure whether the product suits them.
Free account, this exam preselected.
Two labels that are not the scheme riskometer
- Potential Risk Class (PRC) matrix
- A 3 x 3 grid for debt schemes only. It shows the maximum interest rate risk (by Macaulay duration) and maximum credit risk (by credit risk value) the scheme may take. The riskometer shows the risk the portfolio carries now; the PRC shows the ceiling the scheme has committed to.
- Credit Risk-o-Meter
- Introduced by SEBI on 7 October 2026 for debt securities such as bonds sold through offer documents and online bond platforms, coming into force 45 days after the circular. It applies to bond issues, not mutual fund schemes.
For distributors
The riskometer is a starting point for suitability, not a substitute for it. Matching a client with a scheme still depends on the client's risk profile, goals and time horizon. A scheme moving from Moderately High to High during the year is exactly the kind of change the client is told about by e-mail or SMS.
How V-A tests the riskometer
Count questions: how many levels? Six. Frequency questions: how often is it evaluated? Monthly, with disclosure within 10 days. The trap options are 'quarterly' and 'five levels'.
A third pattern lists the levels and asks which is not one. Watch for names that are not on the current list, such as 'Moderately Low' or 'Extremely High'.
FAQs
What is riskometer in mutual fund?expand_more
A SEBI-mandated pictorial meter on a scheme's documents and advertisements that shows its risk level on a six-point scale from Low to Very High.
How many levels are there in the SEBI riskometer?expand_more
Six: Low, Low to Moderate, Moderate, Moderately High, High and Very High.
How often is the riskometer updated?expand_more
It is evaluated every month, and the AMC must publish it within 10 days from the end of the month on its own website and AMFI's.
Does a low riskometer mean my money is safe?expand_more
No. It means the portfolio scores lower on SEBI's risk scale than other schemes. The value of units can still go down.
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