How to read a mutual fund's risk

Two funds can post the same return but carry very different risk. Before investing, read a few standard risk numbers — here's what each means, in plain English.

The SEBI Riskometer

Every fund carries a regulator-mandated risk label from Low to Very High. It's a quick first filter, but coarse — dig into the numbers below for the real picture.

The key risk metrics

• Standard deviation — how much returns swing. Higher = bumpier ride.
• Beta — how sharply the fund moves with the market.
• Sharpe ratio — return earned per unit of total risk.
• Sortino ratio — like Sharpe, but only counts downside risk.
• Alpha — extra return the manager added over the benchmark.
• Information ratio — how consistently the fund beats its benchmark.

How to use them together

Compare these only within the same category (a small-cap will always look riskier than a large-cap). Look for higher Sharpe/Sortino and positive alpha with a beta you're comfortable with. No single number tells the whole story.

→ See all of these under "Risk Analysis" on any fund's detail page.