Investment Advisor NISM Series X-B — Investment Adviser (Level 2) 5

Question 1

A client realizes a short-term capital gain of ₹1,00,000 from equity mutual funds held for 8 months. What is the applicable tax rate in India?

Accepted Answer

15% flat

Answer

Short-term capital gains on equity mutual funds (held less than 12 months) are taxed at a flat 15% under Section 111A of the Income Tax Act.

Question 2

Which of the following is a key difference between a Portfolio Management Service (PMS) and an investment adviser?

Accepted Answer

PMS managers directly manage client assets; investment advisers only provide advice

Answer

PMS providers take discretionary control of client assets, while investment advisers only give advice; execution remains the client's decision.

Question 3

Rebalancing a portfolio back to its target asset allocation primarily serves which purpose?

Accepted Answer

Maintaining the client's intended risk exposure over time

Answer

Rebalancing restores the original risk-return profile by trimming outperforming assets and adding to underperforming ones, keeping risk aligned with the client's tolerance.

Question 4

Which of the following behavioral biases causes investors to hold losing investments too long hoping to break even?

Accepted Answer

Loss aversion / Disposition effect

Answer

The disposition effect (driven by loss aversion) leads investors to hold losing positions to avoid realizing a loss while prematurely selling winners.

Question 5

An adviser recommends a client invest a lump sum in a liquid fund temporarily before deploying into equity via STP. The primary benefit of this strategy is:

Accepted Answer

Rupee-cost averaging combined with capital preservation during deployment

Answer

Using an STP from a liquid fund into equity provides rupee-cost averaging over the deployment period while preserving capital in a low-risk instrument in the interim.

Investment Advisor Practice Test

Investment Advisor Practice Test

Investment Advisor NISM Series X-B — Investment Adviser (Level 2) 5