Mutual Fund Distributors Free Demo Test 1

Explanation

The money received from investors is invested by the mutual fund scheme in a portfolio of securities as per the stated investment objective. Profits or losses, as the case might be, belong to the investors or unitholders.

No other entity involved in the mutual fund in any capacity participates in the scheme’s profits or losses. They are all paid a fee or commission for the contributions they make to launching and operating the schemes.

Explanation

With effect from July 1, 2020, mutual fund units issued against purchase transactions (whether through lump-sum investments or SIP or STP or switch-ins or dividend reinvestment) would be subject to levy of stamp duty @ 0.005% of the amount invested.

Explanation

If the default bank account is being deleted from the list of registered accounts, then before that, another account has to be designated as the default bank account.

Explanation

One of the important factors that impacts the scheme’s NAV is the Total Expense Ratio (TER), charged to the scheme. Though, the same is very tightly regulated through SEBI regulations, the investor should know about the scheme expense ratio.

SEBI has mandated that the Asset Management Companies (AMCs) should prominently disclose on a daily basis, the Total expense ratio (scheme-wise, date-wise) of all schemes on their website. The same must also be published on AMFI website.

Explanation

The first step in goal setting is to identify events in life which will require funding like – marriage, education, buying a vehicle etc.

The next step is to assign priorities – which of these events are more important than the others

After that, one needs to assign a timeline as well as amount of funding required at the time of such events.

Explanation

Portfolio Turnover Ratio is calculated as Value of Purchase and Sale of Securities during a period divided by the average size of net assets of the scheme during the period.
= Rs. 10,000 crore ÷ Rs. 5,000 crore = 2 or 200 percent

This means that investments are held in the portfolio, on an average for 12 months ÷ 2 i.e. 6 months.

Explanation

Recency bias : The impact of recent events on decision making can be very strong. This applies equally to
positive and negative experiences. Investors tend to extrapolate the event into the future and expect a repeat.

A bear market or a financial crisis lead people to prefer safe assets. Similarly, a bull market makes people allocate more than what is advised for risky assets. The recent experience overrides analysis in decision making.

Explanation

CRISIL blended indices for hybrid funds :

Aggressive Hybrid Fund – CRISIL Hybrid 25+75 , Aggressive Index

Balanced Hybrid Fund – CRISIL Hybrid 50+50 , Moderate Index

Conservative Hybrid Fund – CRISIL Hybrid 75+25 , Conservative Index

Explanation

Macaulay Duration is the weighted average of the time to receive the cash flows from a bond.

Long Duration Fund : An open-ended debt scheme investing in debt and money market instruments with Macaulay duration greater than 7 years.

Explanation

For eg – If a fund has a fixed asset allocation of 50:50 for Debt and Equity and if equity valuation rises by 10%, then as per the fixed asset allocation strategy, 10% of equity portfolio will be sold and debt will be bought so that the debt equity valuation will be 50:50.