Labelling may not affect risk perception

Investors perceive debt funds to be a safe and tax-friendly alternative to banks FDs. Grading a fund as 'very high risk' may not have a major impact

My cousin’s family had come home for dinner and their 12-year-old was watching TV and loudly mouthing the advertisements as they came on. When the “Mutual fund Sahi Hai” ad came on, right on cue he shouted: “Mutual Funds (MFs) are subject to market risks. Read offer documents carefully before investing.” 

I remembered this pre-Covid incident when I was reading about the reported move by the Securities and Exchange Board of India (Sebi) to expand the mutual fund risk-o-meter to include a ‘very high risk’ category to cover certain kinds of equity and debt schemes. My nephew jokes that the