NISM Series X-A · Chapter 15: Portfolio Construction Process
पोर्टफोलियो निर्माण प्रक्रिया · NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination
~7 of 150 marks
90 MCQs + 9 case studies · 150 marks · 3 hours · 60% to pass · −25% of a question's marks per wrong answer
28 practice questions in our bank + 1 case study
What this chapter covers
Building a client portfolio: why asset allocation dominates, correlation across asset classes, the steps from the investment policy statement to review, objectives and constraints, unique needs (ESG, ethical investing), goal assessment, psychographic and life-cycle analysis, benchmarking, strategic versus tactical allocation and rebalancing.
पोर्टफोलियो निर्माण — IPS, उद्देश्य व बाधाएँ, निवेशक व्यक्तित्व (BB&K), जीवन-चक्र, बेंचमार्क, SAA बनाम TAA और रीबैलेंसिंग।
What to master before the exam
- The investment policy statement sets objectives, risk appetite, constraints and review; it gives realistic expectations, guides the manager, provides a basis for evaluation and protects against inappropriate decisions.
- Constraints: liquidity (emergency cash usually 2–3 months' spending, near-term goals, flexibility), regulatory (e.g. LRS USD 2,50,000 a year, insider-trading rules), tax and unique preferences such as ESG screens or ethical exclusions.
- The BB&K psychographic model on two axes (confident–anxious, careful–impetuous) gives five personalities: adventurer, celebrity, individualist, guardian and straight arrow.
- Life-cycle phases: accumulation, consolidation, spending (decumulation) and gifting, with risk appetite falling as people age; benchmarks must be comparable ("apple with apple") and reviewed.
- Strategic allocation is the long-term policy mix ("time in the market"); tactical allocation is a short-term tilt ("timing the market"); asset allocation explains about 90% of a single fund's return variation over time; rebalancing trades off transaction and tax costs.
Exam tip: Part of Module 5 (20 marks) and caselet-heavy: given a client's age, goals and temperament, pick the personality type, the life-cycle phase and a suitable allocation. Learn the BB&K quadrants by their two axes.
Sample questions from this chapter
Five of the 28 questions in our free bank. Open the answer to see the explanation — every question in the mock test has one, in English and Hindi.
Question 1
Sustainable investing will consider:
सस्टेनेबल निवेश (sustainable investing) किस पर विचार करेगा?
- Social factorsसामाजिक कारक
- Environmental factorsपर्यावरणीय कारक
- Governance factorsगवर्नेंस कारक
- All of the aboveउपरोक्त सभी
Show answer & explanation
Answer: D — All of the above
Sustainable investing considers environmental, social and governance (ESG) criteria while selecting investments, aiming at financial returns along with a positive impact on society.
सस्टेनेबल निवेश निवेश चुनते समय पर्यावरणीय, सामाजिक और गवर्नेंस (ESG) मानदंडों पर विचार करता है, ताकि वित्तीय रिटर्न के साथ समाज पर सकारात्मक प्रभाव भी हो।
Question 2
Rebalancing the portfolio has to be done:
पोर्टफोलियो का rebalancing कब किया जाना चाहिए?
- Dailyप्रतिदिन
- Neverकभी नहीं
- At regular intervalsनियमित अंतराल पर
- Every decadeहर दशक में
Show answer & explanation
Answer: C — At regular intervals
A portfolio needs to be continuously monitored and periodically rebalanced; the IPS should state “how often” and “how much” — the periodicity and the tolerance for deviation from the target policy portfolio.
पोर्टफोलियो की लगातार निगरानी और समय-समय पर rebalancing आवश्यक है; IPS में “कितनी बार” और “कितना” — यानी आवृत्ति और लक्षित पॉलिसी पोर्टफोलियो से विचलन की सहनशीलता — बताई जानी चाहिए।
Question 3
An asset class is defined as:
एसेट क्लास की परिभाषा है:
- A collection of securities that have similar characteristics, attributes and risk/return relationshipsसमान विशेषताओं, गुणों और risk/return संबंधों वाली सिक्योरिटीज़ का समूह
- All securities issued by the same companyएक ही कंपनी द्वारा जारी सभी सिक्योरिटीज़
- All securities listed on the same stock exchangeएक ही स्टॉक एक्सचेंज पर सूचीबद्ध सभी सिक्योरिटीज़
- All securities with the same maturity dateएक ही परिपक्वता तिथि वाली सभी सिक्योरिटीज़
Show answer & explanation
Answer: A — A collection of securities that have similar characteristics, attributes and risk/return relationships
An asset class is a collection of securities with similar characteristics, attributes and risk/return relationships — e.g. bonds, equities, cash; bonds can be split into Treasury, corporate and junk bonds, equity into large, mid and small cap.
एसेट क्लास समान विशेषताओं, गुणों और risk/return संबंधों वाली सिक्योरिटीज़ का समूह है — जैसे बॉन्ड, इक्विटी, कैश; बॉन्ड को ट्रेज़री, कॉर्पोरेट और जंक बॉन्ड में और इक्विटी को लार्ज, मिड और स्मॉल कैप में बाँटा जा सकता है।
Question 4
According to professional investment experience cited in the workbook, which decision majorly influences the performance of investment portfolios in the long run?
वर्कबुक में उद्धृत पेशेवर निवेश अनुभव के अनुसार, लंबी अवधि में निवेश पोर्टफोलियो के प्रदर्शन को सबसे अधिक कौन सा निर्णय प्रभावित करता है?
- Selection of individual securitiesव्यक्तिगत सिक्योरिटीज़ का चयन
- The asset allocation decisionAsset allocation निर्णय
- The timing of each purchaseप्रत्येक खरीद का समय
- The choice of stockbrokerस्टॉकब्रोकर का चयन
Show answer & explanation
Answer: B — The asset allocation decision
In the long run the asset allocation decision majorly influences portfolio performance; the choice of individual products within an asset class is relevant but contributes less to the end-result.
लंबी अवधि में asset allocation निर्णय पोर्टफोलियो प्रदर्शन को सबसे अधिक प्रभावित करता है; किसी एसेट क्लास के भीतर व्यक्तिगत उत्पादों का चयन प्रासंगिक है, पर अंतिम परिणाम में उसका योगदान कम होता है।
Question 5
The two types of cost of rebalancing a portfolio identified in the workbook are:
वर्कबुक में पोर्टफोलियो rebalancing की कौन सी दो प्रकार की लागतें बताई गई हैं?
- Transaction cost and tax costलेनदेन लागत (transaction cost) और कर लागत (tax cost)
- Entry load and exit load onlyकेवल entry load और exit load
- Custody fee and audit feeकस्टडी शुल्क और ऑडिट शुल्क
- Inflation cost and currency costमुद्रास्फीति लागत और मुद्रा लागत
Show answer & explanation
Answer: A — Transaction cost and tax cost
Rebalancing has transaction costs (research, brokerage etc., higher for illiquid assets like private equity and real estate) and tax costs, since selling appreciated assets attracts tax; there may be an opportunity cost as well.
Rebalancing में लेनदेन लागत (रिसर्च, ब्रोकरेज आदि; प्राइवेट इक्विटी और रियल एस्टेट जैसे illiquid एसेट्स में अधिक) और कर लागत होती है, क्योंकि बढ़े हुए एसेट बेचने पर कर लगता है; अवसर लागत (opportunity cost) भी हो सकती है।
See the NISM Study Hub for X-B (Investment Adviser Level 2) and the mutual fund distributor exams (V-A, V-D) too.
Aumsetu
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