n NISM Certifications
NSM General NISM
Medium

What is the key issue with relying on recent market performance?

Practice question from B1 Intermediate Session 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    It guarantees higher returns

  2. B

    It increases diversification

  3. C

    It reduces volatility

  4. It assumes recent trends will continue

    Correct answer

Why this is the answer

Recency bias makes investors project short-term performance into the future, ignoring long-term cycles.

Test yourself for real

Take a full General NISM mock test.

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