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

Rohit, 35, an IT professional in Bengaluru, invests Rs 20 lakh. A risk questionnaire gives him scores of 4 out of 5 on tolerance. Which factor listed below would most reduce his risk capacity?

Being the sole earner with two young children and a large home loan EMI most reduces Rohit's risk capacity. Dependants and fixed obligations limit his ability to absorb losses, while stable income, an emergency fund and a long horizon would all raise capacity.

  1. AHe has a stable salary with annual increments
  2. BHe has an emergency fund covering twelve months of expenses
  3. CHe has 25 years until retirement
  4. DHe is the sole earner with two young children and a large home loan EMICorrect

Explanation

Sole earning responsibility, dependants and a heavy EMI burden reduce the surplus and the ability to absorb losses, hence lower capacity. Stable income, an emergency fund and a long horizon all increase capacity. Tolerance scores do not change this objective assessment.

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