![Understanding the new risk-o-meter for mutual funds](https://magarticles.magzter.com/articles/2829/553129/5fbb2bae65d9c/Understanding-the-new-risk-o-meter-for-mutual-funds.jpg)
A risk-o-meter for mutual funds existed earlier also, but it was not widely used by investors or their advisors. This was chiefly because asset management companies enjoyed discretion in deciding a fund’s risk level. It was decided mostly on the basis of the category to which the fund belonged.
Now, Sebi has provided a clear formula based on which a fund’s risk level will be determined. In the case of debt funds, for instance, it will be based on the credit risk, interest-rate risk and liquidity risk present in a fund’s portfolio. The final score will be the average of all the three types of risks after which the fund will get categorised into one of the six risk levels. In the case of equity funds, fund houses will have to use the following three criteria: market capitalisation, volatility, and impact cost.
Thus, the methodology for determining a fund’s risk level has been completely standardised. Nothing has been left to the discretion of fund houses for determining a fund’s risk grade, which will depend on its portfolio constituents, rather than the category to which it belongs.
Another difference between the new risk-o-meter and the old one is that the former has six levels of risk whereas the latter had only five levels. Now a risk level called ‘very high’ has been introduced, whereas the earlier one only went up to ‘high’.
What is good about it
Bu hikaye Investors India dergisinin November 2020 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Investors India dergisinin November 2020 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
![How To Build And Maintain A Long-Term Portfolio](https://reseuro.magzter.com/100x125/articles/2829/1724164/BN6GGhsBk1717664338165/crp_HOW-TO-BUILD-AND-MAINTAIN-A-LONGTERM-PORTFOLIO.jpg)
How To Build And Maintain A Long-Term Portfolio
Building a robust long-term portfolio involves two steps. First, you must decide on your asset allocation-essentially the distribution of your investments across various asset classes such that it aligns with your financial goals and risk tolerance.
![Learn The Magic Of Self-Talk](https://reseuro.magzter.com/100x125/articles/2829/1724164/837qQ3-gP1717665021108/crp_LEARN-THE-MAGIC-OF-SELFTALK.jpg)
Learn The Magic Of Self-Talk
There is perpetual self-talk taking place inside all of us
![Health Cover: How Family Floater health insurance plans work to your advantage?](https://reseuro.magzter.com/100x125/articles/2829/1724164/k-ya2pOgK1717664829393/HEALTH-COVER-HOW-FAMILY-FLOATER-HEALTH-INSURANCE-PLANS-WORK-TO-YOUR-ADVANTAGE.jpg)
Health Cover: How Family Floater health insurance plans work to your advantage?
The right amount of health insurance coverage can help you stay on track with your finances and life goals. In the absence of health insurance, one may be forced to delve into current investments, jeopardising ambitions such as children's education and home ownership.
![Empowering Women: Understanding Inheritance Rights in India](https://reseuro.magzter.com/100x125/articles/2829/1724164/uqyROgWRG1717664669053/EMPOWERING-WOMEN-UNDERSTANDING-INHERITANCE-RIGHTS-IN-INDIA.jpg)
Empowering Women: Understanding Inheritance Rights in India
In the intricate tapestry of India's diverse inheritance landscape, where the threads of religious laws weave a complex pattern, don't entrust your legacy to fate's capricious hand. Instead, wield the brush of certainty by crafting your will.
![Protecting Those Who Matter Most: Understanding the Importance of Life Insurance for Our Loved Ones](https://reseuro.magzter.com/100x125/articles/2829/1724164/oxNFOET-W1717664010191/PROTECTING-THOSE-WHO-MATTER-MOST-UNDERSTANDING-THE-IMPORTANCE-OF-LIFE-INSURANCE-FOR-OUR-LOVED-ONES.jpg)
Protecting Those Who Matter Most: Understanding the Importance of Life Insurance for Our Loved Ones
Mr. Sanjiv Bajaj is the Jt. Chairman & MD, Bajaj Capital, building the platform for the Business leaders of the Financial Services and Advisory sector to exchange their vision, experience, and views on making the right financial decisions.
![Unit-Linked Insurance Plans: How to make use of ULIPS to meet long-term goals?](https://reseuro.magzter.com/100x125/articles/2829/1724164/QJ2v76iQq1717663853088/UNITLINKED-INSURANCE-PLANS-HOW-TO-MAKE-USE-OF-ULIPS-TO-MEET-LONGTERM-GOALS.jpg)
Unit-Linked Insurance Plans: How to make use of ULIPS to meet long-term goals?
Unit-linked insurance plans, or Ulips, are a good option if you wish to combine life insurance with savings for long-term goals in one financial plan.
![Why Should One Consider Investing In A Large Cap Fund?](https://reseuro.magzter.com/100x125/articles/2829/1690070/6B2uKcaaD1714998087013/crp_WHY-SHOULD-ONE-CONSIDER-INVESTING-IN-A-LARGECAP-FUND.jpg)
Why Should One Consider Investing In A Large Cap Fund?
An investor’s ability to create wealth in the longterm is directly linked to how well they create an all-weather investment portfolio.
![Meeting Medical Costs with Health Insurance Plans](https://reseuro.magzter.com/100x125/articles/2829/1690070/vwLS_OIbO1714997827079/MEETING-MEDICAL-COSTS-WITH-HEALTH-INSURANCE-PLANS.jpg)
Meeting Medical Costs with Health Insurance Plans
A medical emergency can occur at any time and to any person.
![Water: The Elixir of Life](https://reseuro.magzter.com/100x125/articles/2829/1690070/d4nizb8JO1714997424042/WATER-THE-ELIXIR-OF-LIFE.jpg)
Water: The Elixir of Life
If there is magic on the Planet Earth, it is contained in water - Loran Eiseley.
![The 100 Crore Wealth Legacy! A Vision](https://reseuro.magzter.com/100x125/articles/2829/1690070/_5NPyZSZr1714997076837/THE-100-CRORE-WEALTH-LEGACY-A-VISION.jpg)
The 100 Crore Wealth Legacy! A Vision
Generating 100 crores from modest investments is feasible with a long-term outlook, though market timing remains elusive.