Chapter 12 Topics covered: Scheme Selection based on Investor needs, preferences and risk profile, Risk levels in mutual fund schemes, Active Fund v/s Passive Funds, Open-ended funds v/s close-ended funds, Large-cap v/s Mid-cap v/s Small Cap Funds, Growth or Value funds, International Equity funds, Fixed Maturity Plans, Liquid Funds, Short Duration Fund etc.
1. What crucial decision does an investor need to make concerning asset allocation?
a) Deciding on the individual stocks to invest in
b) Determining how much money to allocate to different scheme categories (asset classes)
c) Choosing the best time to enter the market
d) Predicting short-term market movements
2. Why might categorizing investors based on age alone be imprudent?
a. Age is not a significant factor in risk assessment.
b. Different investors in the same age group may have varied financial goals and situations.
c. Financial goals are irrelevant to risk assessment.
d. Age is too subjective to be a reliable criterion.
3. What is emphasized as an alternative to categorizing investors solely based on age?
a. Occupation
b. Investment time horizon
c. Height
d. Income level
4. What types of investments are commonly found in a core portfolio?
a. High-risk stocks
b. Sector-specific ETFs
c. Low-cost passive investments like ETFs and index funds
d. Individual stocks with high potential returns
5. What is a characteristic of the satellite portfolio?
a. Focus on stability and consistent returns
b. Consists of low-cost passive investments
c. More volatile and actively managed
d. Capitalizes on market opportunities for quick returns
6. What is the aim of the satellite portfolio?
a. Consistent long-term growth
b. Capitalizing on high-risk investments
c. Reducing transactional costs
d. Minimizing portfolio performance
7. What can be broadly inferred about the relationship between risk and potential return in the Risk-Return Hierarchy?
a. They are inversely related
b. They are directly proportional
c. There is no relationship between them
d. They fluctuate randomly
8. According to the Risk-Return Hierarchy, which funds are suitable for investors seeking lower risk and return potential?
a. Equity funds
b. Debt funds
c. Hybrid funds
d. Liquid funds
9. What is the key characteristic of liquid funds in terms of risk and return?
a. High risk, high return
b. Low risk, low return
c. High risk, low return
d. Low risk, high return
10. Which type of fund is likely to be suitable when an investor is willing to take on higher interest rate risk for potentially higher returns?
a. Overnight funds
b. Liquid funds
c. Long duration funds
d. Short duration funds
11. How many types of risk levels are depicted on the Risk-o-meter for mutual fund schemes after the modification by SEBI?
a. Three
b. Five
c. Six
d. Seven
12. How often must the Risk-o-meter be evaluated according to SEBI’s guidelines?
a. Quarterly
b. Annually
c. Monthly
13. What distinguishes large-cap stocks in terms of company characteristics?
a. Initial growth stages
b. Established companies with stable revenues
c. Mid-cap/small cap funds
d. Limited financial strength
14. Why are mid-cap and small-cap companies considered attractive investment options during a booming economy?
a. Stable revenues
b. Limited financial strength
c. Tremendous growth in revenues and profitability
d. Established market presence
15.What is the primary objective of multi cap funds in terms of market capitalization spectrum?
a. Focus on large-cap stocks
b. Benefit from opportunities across the market
c. Concentrate on mid-cap stocks
d. Target small-cap funds
Answers
- b
- b
- b. Investment time horizon
- c. Low-cost passive investments like ETFs and index funds
- c. More volatile and actively managed
- b. Capitalizing on high-risk investments
- b. They are directly proportional
- d. Liquid funds
- b. Low risk, low return
- c. Long duration funds
- c. Six
- c. Monthly
- b.
- c.
- b
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