NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Investment
Mr. Kapoor, 45, wants to build a corpus for retirement in 20 years and says he can tolerate large interim falls in value. Which investment characteristic is most relevant in assessing his ability to take risk?
His long investment horizon and financial capacity to absorb losses is the most relevant. Ability to take risk depends on objective factors like time horizon, income and assets. A 20-year horizon lets him recover from market falls, unlike recent index returns or brand preferences.
- AHis long investment horizon and financial capacity to absorb lossesCorrect
- BThe past-year return of the equity index
- CThe brand name of the fund house he prefers
- DThe coupon rate on his existing bank deposit
Explanation
Ability to take risk depends on objective factors such as time horizon, income stability and net worth. A 20-year horizon allows time to recover from losses. Past index returns, fund brand and an existing deposit coupon do not measure his capacity for risk.
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