KNOWLEDGE CENTRE · November 14, 2026
How to Read a Mutual Fund Riskometer Before Investing
A mutual fund’s name or recent performance does not tell you everything about the risk involved. The Riskometer is a standardised disclosure designed to help investors understand the level of risk associated with a scheme.
What the Riskometer shows
The Riskometer presents a scheme’s risk level on a scale with six labels: Low, Low to Moderate, Moderate, Moderately High, High and Very High. It provides a quick visual indication of the scheme’s assessed risk.
What it does not promise
A lower Riskometer level is not a guarantee that you cannot lose money. A higher level does not mean that a scheme will necessarily deliver higher returns. The Riskometer is a risk disclosure, not a forecast, rating of performance or personal suitability certificate.
Read it with the scheme’s details
Review the scheme’s investment objective, asset allocation, portfolio, benchmark, investment strategy and relevant scheme documents. Understand the types of securities held and the risks associated with them. For debt schemes, for example, interest-rate, credit and liquidity risks may be relevant. Equity schemes are exposed to market and company-related risks.
Compare risk with your own capacity
Risk tolerance is how comfortable you feel with uncertainty and fluctuations. Risk capacity is your financial ability to absorb a loss without undermining essential needs or goals. Both matter. A person may feel comfortable with volatility but still need the money too soon to take substantial risk.
Revisit the disclosure
A scheme’s risk level can change as its portfolio or market conditions change. Check the latest scheme factsheet and disclosures rather than relying on an old screenshot or a past description.
A simple review checklist
Before investing, ask:
- What is the current Riskometer level?
- What assets does the scheme hold?
- What are its main risks?
- When might I need this money?
- Could I withstand a fall in value without disrupting essential goals?
Conclusion
The Riskometer is a useful starting point for understanding mutual fund risk. Use it alongside scheme documents, portfolio information and a realistic assessment of your own financial circumstances.