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

A retired investor needs regular income and has low risk tolerance, but wants returns above a savings account for funds not needed for 2-3 years. Which scheme category is most suitable to consider?

A high-credit-quality short duration or corporate bond fund is most suitable. It matches the 2-3 year horizon, offers moderate returns above a savings account, and limits interest-rate and credit risk. Equity and low-rated credit funds carry volatility or default risk unsuitable for this retiree.

  1. AShort duration or corporate bond fund of high credit qualityCorrect
  2. BSectoral equity fund
  3. CSmall-cap fund
  4. DCredit risk fund with low-rated papers

Explanation

A 2-3 year horizon and low risk tolerance suit high-quality short-duration debt. Equity funds are too volatile for that horizon, and credit risk funds carry default risk that conflicts with low risk tolerance.

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