MUMBAI: The Securities and Exchange Board of India or SEBI, has ordered mutual funds to classify their schemes in five categories in terms of their risk levels, while labelling them. It is aimed to help investors better understand risks involved in mutual fund investments, regulator has replaced the mandatory colour codes with a ‘riskometer’ containing five levels of risks from low to high.
Accordingly, a label as ‘low’ will implicate that the principal amount invested is at low risk; a ‘moderately low’ will suggest that the investment is at moderately low risk; a ‘moderate’ label will mean the investment is at moderate risk; a ‘moderately high’ label will indicate that the principal is at moderately high risk, while a label showing ‘high’ will warn that the investment is at high risk.
Additionally, Sebi asked mutual funds to replace existing color codes by pictorial meter named ‘Riskometer’ for depicting the amount of risk involved in the scheme sold.The norms will be applicable with effect from July 1 to both existing and the new schemes.
(First appeared with The Mint)