Now, choose Mutual Fund by its colour

Updated: Wednesday, March 20, 2013, 10:00 [IST]

In order to address the issue of mis-selling the SEBI had set up a committee to make investors an easy understanding of the schemes which is suitable to them.

It has been decided that all the mutual funds shall ‘Label' their schemes on the parameters as mentioned under:

a. Nature of scheme such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term).

b. A brief about the investment objective (in a single line sentence) followed by kind of product in which investor is investing (Equity/Debt).

c. Level of risk, depicted by colour code boxes as under:
• Blue - principal at low risk.
• Yellow - principal at medium risk.
• Brown - principal at high risk.

Few samples of product label for different schemes:

1. Enumeration of Product label of an Fixed Maturity Plan (FMP)

• Regular fixed income for short term.
• Investment in Debt/Money Market Instrument/Govt. Securities.
• Low risk. (BLUE)

2. Enumeration of Product label of a Hybrid Scheme

Long term capital appreciation and current income.
• Investment in equity and equity related securities as well as fixed income
securities (debt and money market securities).
• Medium risk (YELLOW)

3. Enumeration of Product label of an Equity Scheme

• Long-term capital growth.
• Investment in equity and equity-related securities including equity derivatives of
top 200 companies by market capitalisation.
• High risk. (BROWN)

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