NISM Series X-A: Investment Adviser (Level 1) Review

Comprehensive practice questions covering financial planning, time value of money, regulatory frameworks, investment products, and ethical issues for the NISM Series X-A exam.

What are the core components of a financial plan as per the NISM-Series-X-A workbook?

Streamlining income, expenses, assets, and liabilities to meet current and future fund requirements, including goal identification and action plans.

How is Net Worth calculated in personal finance?

Net Worth = Total Assets minus Total Liabilities.

What is the primary difference between an ordinary annuity and an annuity due?

In an ordinary annuity, payments are made at the end of the period; in an annuity due, payments are made at the beginning of the period.

Define the 'Solvency Ratio' and its significance.

Calculated as Net Worth divided by Total Assets; it indicates the strength of an individual's financial position, with a positive net worth being a critical benchmark.

What is the 'Avalanche' strategy for debt reduction?

A strategy where a borrower ranks debt by interest cost and pays off those with the highest interest rates first to reduce the total interest burden.

Which regulator oversees the Securities Market in India?

Securities and Exchange Board of India (SEBI).

What is the role of an Account Aggregator (AA) in the Indian financial system?

A licensed entity that brings together a customer's financial information from different sources and shares it with third parties only with the customer's express consent.

Differentiate between 'Primary Market' and 'Secondary Market'.

The primary market is where new securities are issued for the first time by a company; the secondary market is where already issued securities are traded between investors.

What is 'Book Building' in the context of an IPO?

A process used to identify the price that the market is willing to pay for securities, where investors bid within a price band and a cut-off price is determined based on demand.

What does 'Mark to Market' (MTM) mean for mutual fund portfolios?

The process of valuing the portfolio on a daily basis at current market prices to determine the scheme's Net Asset Value (NAV).

What is the minimum investment requirement for a Portfolio Management Service (PMS) and an Alternative Investment Fund (AIF) in India?

The minimum investment is Rs. 50 Lakhs for PMS and Rs. 1 Crore for AIF (with certain exceptions like Angel Funds or Accredited Investors).

Define 'Beta' in the context of portfolio management.

A measure of market risk or systematic risk that reflects the sensitivity of a fund's return to fluctuations in the market index.

What is the 'High Water Mark' principle in PMS fee calculation?

A principle where performance-linked fees are only paid if the current value of the portfolio exceeds the previous highest level on which fees were already paid.

Explain 'Tactical Asset Allocation' (TAA).

A short-term strategy of shifting funds between asset classes to exploit market discrepancies and time the market for higher returns, within the broad framework of Strategic Asset Allocation.

What is 'Transmission of Securities'?

The legal process of transferring securities to survivors, nominees, or legal heirs upon the death of the original investor.

What is the 'Fiduciary Responsibility' of an Investment Adviser?

The legal and ethical obligation to act solely in the best interest of the client, ensuring honesty, fairness, and the disclosure of all conflicts of interest.

What does SEBI's SCORES platform provide?

A centralized web-based grievance redressal system where investors can lodge complaints against entities and intermediaries regulated by SEBI.

Under PMLA, for how long must reporting entities maintain records of transactions?

Five years from the date of the transaction between a client and the reporting entity.

What is 'Rupee Cost Averaging' in an SIP?

An strategy where fixed periodic investments result in buying more units when prices are low and fewer when prices are high, lowering the average cost per unit over time.

What is the 'Sharpe Ratio' used for?

Measuring risk-adjusted performance by dividing the portfolio's excess return (above risk-free rate) by its standard deviation (total risk).