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Market Intelligence › Basic Terminologies
What the risk labels mean, and what they do not tell you
Published by The Retail Trader · AUG 06, 2026 · Mutual Funds & AMC
Every scheme comes with a riskometer that runs from low to very high. It is a useful disclosure, but reading more into it than it says is a common mistake.
The riskometer is built from a risk score based on the scheme's portfolio — it takes in things like credit quality, interest rate sensitivity and market cap.
It is reviewed every month, so a scheme's riskometer can change over time.
These things cannot be learned from a riskometer:
• It gives no estimate of return.
• It does not say whether the fund is good or bad.
• Two "very high" funds can have completely different real risk.
• It certainly does not say whether the risk is right for you — that depends on your goal.
Tie the risk label to your own horizon. Very high risk can be fine for a fifteen-year goal and completely wrong for next year's fees — the risk is not bad in itself, the mistake is in where it is placed.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no guaranteed-return claim, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.