n NISM Certifications
V-A NISM Series V-A
Medium

Smita is a young investor and her parents advise her to invest in fixed deposits of banks so that these funds can be used for her retirement. If Smita follows her parents' advice, what risk does she face?

Practice question from NISM Series V A - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    She has to select the correct bank which is financially strong

  2. B

    There is a high risk of default in her portfolio

  3. There is a risk of low returns

    Correct answer

  4. D

    There is no risk as fixed deposits are quite safe

Why this is the answer

While fixed deposits are considered safe, they generally offer low returns, especially in comparison to other investment options like equity mutual funds. For long-term goals such as retirement, the low returns from fixed deposits may not be sufficient to outpace inflation and grow the required corpus.

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