Investment Adviser (Level 1) Free Demo Test 10

Market timing refers to the strategy of adjusting the allocation of investments in a portfolio based on predictions or forecasts about future movements in the financial markets. In this case, the portfolio manager is making a timing decision by reducing the allocation to stocks (equities) from 70% to 40% based on the belief that the equity markets are heading for a downside.

 Strategic asset allocation is a long-term investment strategy that focuses on establishing target allocations to different asset classes based on an investor’s financial goals and risk tolerance. It does not involve trying to time the market or take advantage of short-term fluctuations in financial markets, making option (b) the correct answer.

The number of covariance terms is arrived by using the formula: (n^2 – n) / 2, where n is the number of securities in the portfolio.

N = 50

n^2 = 50^2 ie. 50 X 50 = 2500

(n^2 – n) / 2 = (2500 – 50) / 2 = 1225

The Securities Appellate Tribunal (SAT) according to Section 15U of the SEBI Act is not bound by the procedure laid down by the Code of Civil Procedure, but shall be guided by the principles of natural justice and shall have the powers to regulate their own procedures.

In actively managed funds, the fund manager plays a crucial role in making investment decisions. The manager actively selects and manages the fund’s investments with the goal of outperforming the market or a specific benchmark. This involves continuous research, analysis, and decision-making based on market conditions and the fund’s objectives. In contrast, passive funds, such as passive index funds (a, b, and c), aim to replicate the performance of a specific market index and typically do not involve active decision-making by a fund manager.