Q2. What is the meaning of diversification?
- Correct answer: Method of investing across various options to reduce risk.
- Explanation: Diversify between asset classes (equity, debt, gold, real estate, G-Secs) and within them (multiple sectors and companies in equity; equity, debt, liquid, hybrid within mutual funds) to lower concentration risk and smoothen returns via low/negative correlation.
Q3. The phrase “patience pays” is opposite of:
- Correct answer: Instant gratification.
- Explanation: Long-term, disciplined investing outperforms short-term impulse trades because compounding and sound process beat timing; “instant gratification” tempts frequent trading and panic selling.
Q4. What is the main objective of buying an insurance policy?
- Correct answer: To cover the risk of unforeseen events.
- Explanation: Insurance is risk transfer, not a return product; paying premium secures you against low-probability, high-impact events in health, life, or property.
Q5. A stock has given 50% return over the last two years. What will be the expected return in the next two years?
- Correct answer: Cannot be predicted.
- Explanation: Future returns depend on economy–industry–company fundamentals and regime shifts; past 2-year performance alone is insufficient for prediction.
Q6. The risk of not being able to access your money when you need it is called:
- Correct answer: Liquidity risk.
- Explanation: Real estate is hard to sell quickly at fair value for partial cash needs, whereas listed equities, mutual funds, and gold are comparatively liquid.
Q7. While investing, what three features should one look for?
- Correct answer: Safety, Returns, Liquidity.
- Explanation: No product is permanently high on all three; evaluate every instrument (FDs, MFs, gold, G-Secs, real estate) on this SRL lens for your goal and horizon.
Q8. In long-term planning like retirement, the most important factor due to which household cost goes up over time is:
- Correct answer: Inflation.
- Explanation: Rising prices erode purchasing power; plan for higher future expenses and prefer inflation-beating assets for long-duration goals.
Q9. A 70-year-old should not have any exposure to equity. Which of the following is true?
- Correct answer: Depends on his risk capacity.
- Explanation: Conventional guidance is to de-risk as active income stops, but a small equity allocation may fit some retirees depending on goals, cash flows, and risk capacity.
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Q10. The risk of loss of purchasing power has another name:
- Correct answer: Inflation risk.
- Explanation: If inflation is 5%, a ₹100 basket costs ₹105 next year; always think in real returns (nominal minus inflation).
Q11. An investor with a conservative risk profile is likely to be uncomfortable with major holding in:
- Correct answer: Equity-oriented mutual funds.
- Explanation: Conservative investors prefer PPF, FDs, G-Secs, SCSS; equity exposure brings market volatility misaligned with low risk tolerance.
Q12. Under compound interest, you earn:
- Correct answer: Interest on the principal as well as on the accumulated interest.
- Explanation: Year 1: ₹100 → ₹110 at 10%; Year 2 interest is on ₹110; compounding accelerates wealth with time and consistency.
Q13. What is the primary effect of a bonus issue on outstanding shares?
- Correct answer: Number of shares increases; price adjusts so total value stays broadly unchanged at announcement.
- Explanation: In a 1:1 bonus, shares double and price halves approximately, keeping equity value similar pre–post adjustment, with later price set by market action.
Q14. Falling stock prices and weak economic indicators indicate which market phase?
- Correct answer: Bear market.
- Explanation: Bear = declining prices and pessimism; Bull = rising prices and optimism; use earnings and macro data to frame phases.
Q15. Trading on official exchanges vs dabba trading—what’s correct?
- Correct answer: NSE/BSE trading is legal and regulated; dabba trading is illegal and outside formal oversight.
- Explanation: Exchange trades are monitored and taxed; dabba bypasses systems, offering no investor protection—avoid entirely.
Q16. CAS (Consolidated Account Statement) provides:
- Correct answer: A consolidated view of financial securities and transactions across AMCs/depositories.
- Explanation: CAS simplifies tracking allocation, performance, and gaps—use it for reviews and rebalancing.
Q17. A contract note is sent by:
- Correct answer: The broker to the client after execution.
- Explanation: It is the legal record of trade details and charges; verify promptly and retain for taxation.
Additional questions covered in the video are mapped to these core ideas:
- Asset classes and allocation: diversification, SRL evaluation.
- Risk categories: market, credit, liquidity, inflation, and examples.
- Investor behavior: discipline vs instant gratification; herding pitfalls.
- Corporate actions: bonus adjustment logic versus cash dividends.
- Process and compliance: exchange trading, contract notes, CAS utility.
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