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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors

Ms. Kavita Rao, 35, answered a risk questionnaire. Her answers showed high risk tolerance but her emergency fund is nil, she has a large home loan EMI and one earning member in the family. Which of the following is the most appropriate step before finalising an equity-heavy portfolio?

The adviser should first help her build an emergency fund and then reassess her capacity before setting allocation. Her high tolerance score does not offset a heavy EMI burden, a single income and no liquidity buffer, all of which reduce her ability to withstand losses.

  1. AFinalise the portfolio because the questionnaire score is the sole input
  2. BBuild an emergency fund and reassess capacity, then set the allocationCorrect
  3. CIncrease equity exposure to speed up wealth creation for loan repayment
  4. DSkip risk profiling because she is below 40 years of age

Explanation

Lack of liquidity, high fixed obligations and single income reduce capacity, so an emergency buffer should come first. A questionnaire score reflects only tolerance. Option C increases risk when her cushion is absent.

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