Smart things to know about mutual fund colour coding

1. The colour code of a mutual fund scheme, represented by a small coloured box, helps to ascertain the level of risk that the scheme is exposed to.

2. The Sebi has mandated that all scheme sales material, including advertisements, application forms and brochures, should have colour coding.

3. Blue indicates that the principal amount invested is at low risk, yellow shows that the principal is at medium risk, while brown hints at high risk to the principal.

4. The colour codes are also described in text beside the colour code box and investors are advised to check the scheme documents and seek advice before investing.

5. These codes help investors classify the schemes based on their suitability and indicative time horizon for their own needs.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava).