How to read Dhanik risk scores

Each Dhanik fund page shows risk two ways: the official SEBI riskometer (Low → Very High) and the hard numbers behind it. The riskometer is a regulatory label — useful as a first glance, but too coarse to compare two funds in the same category. The numbers are where real comparison happens, and reading them takes two minutes once you know what each one measures.

The four numbers that matter

• Standard deviation: how much the fund's returns bounce around their average — higher means a wilder ride. Two funds can both average 12% a year, but the one with a 20% standard deviation will test your nerves far more than one at 11% (full definition).
• Sharpe ratio: return earned per unit of risk taken. If Fund A returns 14% with high volatility and Fund B returns 13% with far less, B's higher Sharpe tells you it worked smarter, not just harder (how it's computed).
• Beta: how much the fund moves relative to its benchmark. A beta of 1.2 means it typically rises — and falls — about 20% more than the index; below 1 means it's steadier than the market.
• Max drawdown: the worst peak-to-trough fall in the fund's history. This is the most honest number on the page: it tells you exactly how bad holding this fund has ever felt.

A worked example

Imagine ₹5,00,000 in a fund whose max drawdown is 45%. At the bottom of a similar future crash, your statement would read roughly ₹2,75,000. If seeing that would make you redeem, the fund's long-term return is irrelevant — you would never stay invested long enough to earn it. A steadier fund with a 25% drawdown would show about ₹3,75,000 at the same point, which many investors can sit through.

Read them together, not alone

No single number is a verdict. A high standard deviation with a high Sharpe can describe an excellent aggressive fund; a low beta with a weak return can describe a fund that's merely sleepy. Two funds with the same return can carry very different risk — the numbers exist to reveal which one earned its return the harder way. Match the profile to your own horizon: long-horizon SIP investors can accept more drawdown than someone two years from a goal.

Matching numbers to your situation

The same fund can be right for one investor and wrong for another. A 25-year-old running a 15-year SIP can rationally accept a deep-drawdown, high-Sharpe equity fund; someone three years from a house down-payment should be looking at low standard-deviation hybrid or debt categories instead, where the worst historical fall is one they could absorb without changing plans.

Risk metrics describe the past; they don't guarantee the future. Mutual fund investments are subject to market risks — use these numbers as research inputs, not predictions.

→ Learn the ratios in depth in how to read fund risk, then compare risk profiles in the Compare tab.