n NISM Certifications
X NISM Series X
Medium

Ms. Kamat advises her client, Mr. Das, to invest in derivatives to make up a shortfall near retirement. What is the appropriateness of this advice?

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Correct if she is willing to bear losses

  2. B

    Correct if derivatives will help him reach his goal

  3. Not correct, as derivatives are unsuitable at this lifecycle stage

    Correct answer

  4. D

    Correct because she is an expert in derivatives

Why this is the answer

Approaching retirement, investors should focus on capital preservation; derivatives are risky, unsuitable for such a stage.

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