The level of concentration in a portfolio is higher when an individual invests directly in equity shares and does not diversify sufficiently, compared to investing through mutual funds which are professionally managed and diversified.

Practice question from NISM Series XB- Investment Adviser (Level 2) Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

The level of concentration is higher when one invests in direct equity and do not diversify adequately

Correct answer
B

The level of concentration is higher in equity mutual funds as the portfolio construction is upto the fund manager
C

The level of concentration is in direct equity and equity mutual fund is almost NIL as both are well diversified
D

The level of concentration is higher when investing in both equally

Why this is the answer

Direct equity investments tend to be concentrated in few stocks, increasing portfolio risk, unlike diversified mutual funds.

Test yourself for real

Take a full NISM Series X mock test.

Same duration, same weighting, same difficulty distribution as the real exam — with explanations on every question.

NISM Series XB- Investment Adviser (Leve…