Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Behavioural Finance in Practice

Mrs. Iyer, aged 58, checks her portfolio daily. After a 6% fall in the market over two weeks she wants to move everything to fixed deposits, though her plan assumes a 10-year horizon for the equity portion. Which adviser action best applies behavioural finance practice?

The adviser should revisit the documented goals and risk profile and show long-term evidence on market declines and recoveries before any change. This addresses myopic loss aversion caused by frequent checking, while respecting the client's right to decide and keeping advice suitable and transparent.

  1. AExecute the switch immediately because client instructions override the plan
  2. BRevisit the documented goals and risk profile, and show the long-term data on drawdowns and recoveries before any changeCorrect
  3. CIncrease equity exposure to average down without discussion
  4. DStop sharing portfolio reports so she does not see the fall

Explanation

Her reaction reflects myopic loss aversion from frequent monitoring. A good adviser reframes using goals, horizon and the agreed risk profile, so decisions are deliberate. Executing blindly, increasing risk without consent, or hiding information are all poor practice and breach duties of transparency.

Did you get it right without looking?

One question tells you little. A timed set on Behavioural Finance in Practice shows your real accuracy, how long you take and where you lose marks.

Practise Behavioural Finance in PracticeFree diagnostic mock

More Behavioural Finance in Practice questions