Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Comparison of Products Across Categories

Ms. Kapoor, aged 35, has a 25-year horizon for retirement and a high risk tolerance. She is comparing equity mutual funds with a debt-oriented option for her long-term retirement corpus. Which statement is most appropriate for the adviser to make regarding inflation risk?

For a 25-year horizon, a mostly fixed-return allocation faces higher inflation risk, since after-tax returns may not keep pace with rising prices. Equity has historically beaten inflation over long periods, though it offers no guarantee and is volatile.

  1. AOver long horizons, a predominantly fixed-return allocation carries greater risk of failing to beat inflation than an equity allocationCorrect
  2. BFixed-income products carry no risk of any type over 25 years
  3. CEquity funds guarantee a return above inflation over 25 years
  4. DInflation affects only equity investments

Explanation

Over long periods, low-yielding fixed-return products may fail to preserve purchasing power after tax and inflation. Equity has historically offered inflation-beating returns but with no guarantee and with volatility. The other statements are absolute and incorrect.

Did you get it right without looking?

One question tells you little. A timed set on Comparison of Products Across Categories shows your real accuracy, how long you take and where you lose marks.

Practise Comparison of Products Across CategoriesFree diagnostic mock

More Comparison of Products Across Categories questions