Like all other investment instruments, mutual funds also carry some risk. Weighing these risks is essential before investing. Usually, an investor’s level of risk tolerance is taken into account when making investing selections. A riskometer for mutual funds can help you with this. 

What is a riskometer? 

A riskometer is a visual representation of a mutual fund scheme’s risk profile. It demonstrates the degree of risk connected to the initial investment made in a mutual fund. Five levels make up the riskometer: low, substantially low, moderate, moderately high, and high. 

Investors may use a riskometer as a part of their metrics to choose mutual funds that match their degrees of risk tolerance, given the wide range of mutual funds available. Investors who want to evaluate the fund’s risk levels and determine if they match their own might benefit from this indicator. 

Understanding a riskometer 

Investors can use a riskometer as one of their criteria to choose mutual funds that match their degree of risk tolerance, given the wide range of mutual funds available. Investors who want to evaluate the fund’s risk levels and determine whether they match their own can benefit from this indicator. 

It is vital to remember that while the riskometer can give an overview of the risk level, it cannot be the only factor considered when choosing a fund to invest in. When choosing a fund, you should consider several other factors, like your investment objective, time horizon, past performance, etc. 

Riskometer risk levels 

There are five risk levels in the riskometer. It displays the scheme’s level of risk and is designed to resemble a speedometer. The five risk categories are: 

  • Low-risk level 

This category typically includes securities and products, including fixed maturity plans, gilt funds, and income funds. These mutual funds are considered the safest, making them ideal for investors searching for reliable income. 

  • Moderately low-risk level 

Bonds with a short to medium term are typically included in this group. They are suitable for investors who can commit to a position for one to three years and are considered safe investments. 

  • Moderate risk level 

It means that the principle of the funds in this category is at moderate risk. Arbitrage funds, MIP funds, and hybrid debt-oriented funds are suitable for semi-conservative investors who wish to limit risk while still booking respectable profits. These funds are appropriate for investors with a medium- to long-term time horizon. 

  • Moderately high-risk level 

The principle of the funds in this category is at fairly high risk. This category typically includes gold ETFs, diversified equity funds, balanced equity-oriented funds, and index funds. Investors looking to build wealth over an extended period might consider the products sold under this brand. These funds invest in equity, which is tied to the large-cap market. 

  • High-risk level 

This designation indicates that the principal of the funds falling under this category is highly risky. Examples of funds that fall under this category include sectoral, thematic, international, and micro-cap funds. Products bearing this designation are appropriate for investors who want to build wealth over an extended period and are comfortable taking a significant risk on their investment. 

Types of risks in mutual funds measured by riskometer 

Here are five different risks that can impact your portfolio of mutual funds. 

  • Market hazard 

Loss of all or a portion of your capital is a possibility. As markets change, the value of your mutual funds may decrease. 

  • Risk of inflation 

The potential loss of buying power If the cost of living increases by 2% and your mutual funds gain 5% annually, your real return is only 2%. 

  • Interest rate uncertainty 

Increasing interest rates may result in a value reduction for your mutual funds. Bond mutual funds may experience a decline due to falling bond prices when interest rates rise. 

  • Financial risk 

Your benefits may be diminished if the exchange rate declines (or add to losses). A drop in foreign currency can lower your profits when converted back into Canadian dollars, even if the value of a fund denominated in that currency increases. 

  • Credit danger 

A bond or other security issuer may not have enough cash to pay interest or redeem the bonds for face value when they’re due. Higher default risk securities typically offer higher rewards. 

Frequently Asked Questions

The riskometer graphically represents a mutual fund’s risk. It has a speedometer-like appearance and shows five risk categories, each with a corresponding color. 


The six levels of the new Riskometer’s pictorial depiction, which range from green for little risk to dark red for very high risk, are each denoted by a color, a number, or both. The Riskometer’s needle position indicates the degree of risk a fund is exposed to. 


By deducting the risk-free rate of return (the yield on a US Treasury bond) from the return on investment and dividing the result by the investment’s standard deviation of return, the fund level risk is determined. 


You can check the risk level of the scheme from the riskometer and choose the fund accordingly if you have a low-risk tolerance and don’t want to be exposed to market volatility. As a result, it is highly helpful to investors when choosing the finest fund for their portfolio. 


Risk assessment methods for mutual funds are: 

  • Beta 
  • Alpha 
  • R Squared 
  • Typical Deviation 
  • The Sharpe Ratio 
  • Sortino Ratio. 

Related Terms

    Read the Latest Market Journal

    Weekly Updates 4/3/24 – 8/3/24

    Published on Mar 4, 2024

    This weekly update is designed to help you stay informed and relate economic and company...

    Weekly Updates 26/2/24 – 1/3/24

    Published on Feb 28, 2024 60 

    This weekly update is designed to help you stay informed and relate economic and company...

    All-in-One Guide to Investing in China via ETFs

    Published on Feb 27, 2024 350 

    Start trading on POEMS! Open a free account here! Why China? In the vast landscape...

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 368 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 61 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 66 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 89 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 198 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com