What is a Riskometer in mutual fund?

Riskometer is a graphical representation of the risk a mutual fund carries. It resembles the speedometer of a vehicle and displays 5-levels of risk, each with a respective colour.

What is Sebi Riskometer?

Understanding Riskometer Investment decisions are usually based on an investor’s risk appetite. As per the SEBI circular, ‘The depiction of risk using colour codes would be replaced by pictorial meter named riskometer and this meter would appropriately depict the level of risk in any specific scheme.

How is Riskometer calculated?

The risk score at the overall fund level will be calculated as a simple average of these risk values of each instrument. Depending on this average, the fund will be given one of the 6 risk labels in the Risk-O-Meter. For instance, if the average is 1 then the risk label will be ‘Low’.

How do you draw a Riskometer?

So to do this, try Seelig’s riskometer. Draw a circle. Place on the circumference, six ‘realms”, or types of risk (financial, intellectual, social, political, emotional, physical. On the spoke, mark the place where your risk appetite resides…’high’, close to the circumference, ‘low’, close to the center.

What is Sharpe ratio in mutual fund?

Sharpe ratio is used to evaluate the risk-adjusted performance of a mutual fund. Basically, this ratio tells an investor how much extra return he will receive on holding a risky asset.

Are mutual funds low or high risk?

All funds carry some level of risk. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.

What is high risk in investing?

A high-risk investment is one for which there is either a large percentage chance of loss of capital or under-performance—or a relatively high chance of a devastating loss.

What is NAV of a stock?

“Net asset value,” or “NAV,” of an investment company is the company’s total assets minus its total liabilities. For example, if an investment company has securities and other assets worth $100 million and has liabilities of $10 million, the investment company’s NAV will be $90 million.

What is a good Alpha for a mutual fund?

Anything more than zero is a good alpha; higher the alpha ratio in mutual fund schemes on a consistent basis, higher is the potential of long term returns. Generally, beta of around 1 or less is recommended.

What do the different risk levels on the riskometer mean?

As shown in the figure, the riskometer has five levels of risks. It is made to look similar to a car’s speedometer and indicates the scheme’s risk level. The five risk levels are ‘low’, ‘moderately low’, ‘moderate’, ‘moderately high’ and ‘high’. Let’ see each of them.

What is a riskometer for mutual funds?

In 2015, the Securities and Exchange Board of India ( SEBI) made it mandatory for all mutual fund houses to display a riskometer for all of their mutual fund schemes to enable investors assess the amount of risk associated with mutual fund investments. The below table gives a snapshot of risk profiles of some mutual fund categories:

What is SEBI’s riskometer?

To help investors be aware of the risks associated with mutual fund investments, SEBI has made it mandatory for all fund houses to display a riskometer depicting the five levels of risk effective July 1, 2015.

How often should the risk-O-Meter be evaluated?

The risk-o-meter must be evaluated on a monthly basis. Fund houses are required to disclose the risko-o-meter risk level along with the portfolio disclosure for all their schemes on their own websites as well as the website of the Association of Mutual Funds in India (AMFI) within 10 days of the close of each month.