MUTUAL FUNDS (MF) RISK-O-METER

Jan. 14, 2021

Securities and Exchange Board of India’s (SEBI’s) decision on the “risk-o-meter”, which it announced on October 5, 2020, came into effect on January 1.

About:

In its circular issued on October 5, the regulator made it mandatory for mutual fund houses to characterise the risk level of their schemes on a six-stage scale from “Low” to “Very High”.
All mutual funds shall, beginning January 1, assign a risk level to their schemes at the time of launch, based on the scheme’s characteristics.
The risk-o-meter must be evaluated on a monthly basis.
Fund houses are required to disclose the risk-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.
Any change in the risk-o-meter reading with regard to a scheme shall be communicated to the unit-holders of that scheme.
The move will help investors to make a more informed investment decision.