<div><em>Henceforth, every MF scheme will carry a representation indicating the level of risk it carries, says <strong>Sunil Dhawan</strong></em><br><br><br>.From 1st July, all mutual funds schemes including the existing ones will shed their colours. This is to say that the practice of representing the level of risk that a mutual fund scheme carries in terms of blue, yellow and brown colour, will be stopped. The colour codes are being replaced by a pictorial meter called Riskometer. Similar to a speedometer that tells you how much you are speeding, Riskometer helps you to understand the risk profile and level of the MF scheme. </div><div> </div><div> In the new approach, instead of current three levels, there will five levels of risk. </div><div>i.<span class="Apple-tab-span" style="white-space:pre"> </span> Low - principal at low risk </div><div>ii.<span class="Apple-tab-span" style="white-space:pre"> </span> Moderately Low - principal at moderately low risk</div><div>iii.<span class="Apple-tab-span" style="white-space:pre"> </span> Moderate - principal at moderate risk</div><div>iv.<span class="Apple-tab-span" style="white-space:pre"> </span> Moderately High -- principal at moderately high risk </div><div>v.<span class="Apple-tab-span" style="white-space:pre"> </span>High - principal at high risk </div><div><br>Currently, the colour codes representing the risk-level are being shown as</div><div><img alt="" src="http://bw-image.s3.amazonaws.com/label-large.jpg" style="width: 650px; height: 191px; margin: 1px;"></div><div> </div><div><br>Henceforth, every MF scheme will carry this representation indicating the level of risk it carries.<br> </div><div>How does it help: As an investor, it helps to get a first-hand view of the risk, a MF scheme is carrying. For equity funds, it indicates the level of risk because of its underlying asset (equity) and the concentration risk it is exposed to. Within each category of funds, say within equity funds there can be several variants such as diversified funds, large-cap or mid-cap funds or even thematic funds. Thematic funds for instance would carry relatively high risk than diversified equity funds as the former carries more of concentration risk. </div><div>End note: Riskometer can be a good starting point to look at MF’s. If your goal is a long term, stick to those which are “moderately high”. Thematic funds have “high” as any change in regulations, market conditions or a specific factor may pull down the fortune of the sector involved. They need tracking more frequently than other equity funds. Do not merely invest on the basis of the Riskometer but evaluate schemes on several other parameters to find the right one meeting your requirement. </div><div> </div>
_20241106124408_original_image_40.webp)
