Skip to content

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

An investor wants to compare two flexi-cap schemes for consistency of performance. Which approach is most appropriate for a distributor?

Comparing rolling returns over several periods against the same benchmark and peer group is best, because it shows consistency and avoids point-to-point date bias. A low NAV does not make a scheme cheap, and very short-term returns or unrelated comparisons are not meaningful.

  1. ACompare the one-day returns of both schemes
  2. BCompare the NAVs and choose the scheme with the lower NAV as it is cheaper
  3. CCompare rolling returns over multiple periods against the same benchmark and peer groupCorrect
  4. DCompare the schemes' returns with a bank fixed deposit only

Explanation

Rolling returns across several periods show consistency and reduce the bias of choosing a single start and end date. Comparison should be with the right benchmark and peer group. NAV level alone says nothing about quality, and one-day returns are noise.

Did you get it right without looking?

One question tells you little. A timed set on Mutual Fund Scheme Selection shows your real accuracy, how long you take and where you lose marks.

Practise Mutual Fund Scheme SelectionFree diagnostic mock

More Mutual Fund Scheme Selection questions