The Mutual Fund Riskometer, Explained
Learn what a scheme's risk label communicates, what can make it change and what it cannot tell you.
What the Riskometer does
The Riskometer places a mutual fund scheme on a risk scale based on characteristics of its portfolio. It offers a quick starting point for comparing broad risk levels.
It is not a prediction of future return or a guarantee that losses will stay within a fixed limit.
Risk can change
A scheme's label can change when its holdings, market conditions or assessed risk characteristics change. Review current disclosures rather than relying on the label shown when you first invested.
Look beyond one label
Two schemes with the same broad risk label can behave differently. Consider their assets, concentration, credit quality, interest-rate sensitivity and historical drawdowns.
- Volatility: how widely values may move.
- Credit risk: the possibility that an issuer may not repay as expected.
- Liquidity risk: difficulty selling an investment at a reasonable price.
- Concentration risk: heavy exposure to a few securities, sectors or themes.
Match risk with capacity
Risk tolerance is how comfortable you feel with losses; risk capacity is how much loss your financial plan can withstand. Both matter, and they are not always the same.