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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Selection

A distributor is helping an investor who wants to hold a mutual fund for 10 years and is comfortable with market ups and downs. Which factor should be assessed FIRST before recommending any scheme?

The distributor should first assess the investor's risk profile, financial goals and investment horizon. Scheme selection must be matched to the investor's needs. Recent returns, low NAV or new launches do not indicate suitability for the investor.

  1. AThe investor's risk profile, goals and investment horizonCorrect
  2. BThe scheme with the highest one-year return
  3. CThe scheme with the lowest NAV per unit
  4. DThe scheme launched most recently by the AMC

Explanation

Scheme selection starts with understanding the investor: risk appetite, goals, time horizon and liquidity needs. Past one-year return, a low NAV or a new launch says nothing about suitability. A low NAV does not mean a scheme is cheap.

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