Decoded: How Sebi's 'risk-o-meter' grading of MF schemes helps investors

Sebi has further improvised the risk-o-meter, which will have six levels, up from five. The labels now range from 'low' to 'very high risk'

The markets regulator, Securities and Exchange Board of India (Sebi), on Monday introduced fresh guidelines to determine the place of a mutual fund (MF) on its riskometer tool. Samie Modak explains the upgraded risk profile depiction system 

What is riskometer?

In 2013, Sebi introduced the concept of ‘product labelling’ for the MF industry. The move was aimed at helping investors decipher the inherent risk in a scheme through easy-to-understand pictorial depiction. In the first avatar, the labelling system used three colours — blue (to denote low-risk), yellow (medium risk), and brown (high risk). In 2015, Sebi tweaked the system, replacing