Mutual Fund Foundation

Syllabus and chapter weightage

Weightages are taken from the official syllabus table published in the NISM workbook, so you can see exactly where the marks are.

Every chapter can be read free, no account needed — tap a chapter to open its plain-English Foundation lesson.

Sample questions

5 questions from the chapter tests, one per chapter. Pick your answer before you open the explanation.

1. Question 1 · Chapter 1: Investment Landscape

   An expense of Rs. 50,000 in today's money terms is likely to be required in 3 years. Inflation is expected at 10%. How much will be the future requirement of money?

   1. A.50,000 × (1 + 10%)³
   2. B.50,000 ÷ (1 + 10%)³
   3. C.50,000 + (1 + 10%)³
   4. D.50,000 − (1 + 10%)³
   Show the answer

   Answer: A. 50,000 × (1 + 10%)³

   The future cost is the present cost multiplied by (1 + inflation) raised to the number of years: 50,000 × (1.10)³ = 50,000 × 1.331 = ₹66,550.

   Option B answers the opposite question — what a future sum is worth today. Options C and D are not arithmetic operations that mean anything here.

   Why the adjustment matters: this question must be answered in terms of amount needed when the goal is due. In such a case, the costs are quite likely to move up. Such a rise in the cost of the goals is called inflation with respect to the goal value.

   Inflation adjustment for the goal values is critical, without which the entire planning can go haywire.

   The workbook's own case: Sapna is an 8-year-old girl... the estimated cost of her higher education is Rs. 10 lacs (in today's price), whereas Sapna would go to college 10 years later. If the inflation in college fees is expected to be 8% p.a., her parents need to provide for Rs. 21.59 lakh in 10 years, approximately.

   And what happens without it: the parents may plan to accumulate Rs. 10 lacs (today's cost of education), which would be grossly insufficient.

   Over longer periods it compounds sharply. If a family's monthly expenses are Rs. 30,000 currently, they would be spending Rs. 31,800 next year if the inflation is 6%... this family's monthly expenses would cross Rs. 53,000 after 10 years; and Rs. 96,000 after 20 years.

   But not every goal needs it: the immediate term and near term goals may not have a big impact due to changes in price.

2. Question 2 · Chapter 2: Concept and Role of a mutual fund

   Which measure indicates how much money can be generated per unit of a mutual fund scheme if the scheme is liquidated?

   1. A.Assets Under Management
   2. B.Net Asset Value
   3. C.Market price
   4. D.Exit load
   Show the answer

   Answer: B. Net Asset Value

   The Net Asset Value is the true worth of a unit, and the workbook adds the definition this question is built on: the NAV is also the net realisable value per unit in case the scheme is to be liquidated — how much money could be generated if all the holdings were sold and converted into cash.

   AUM is the size of the whole scheme, not a per-unit figure (though AUM = NAV × units outstanding). Market price applies to listed units and can differ from NAV. Exit load is a charge on redemption, not a valuation.

3. Question 3 · Chapter 3: Legal Structure of mutual funds

   Mutual funds are constituted as trusts in India. Who are the beneficiaries of the trust?

   1. A.The employees of the Asset Management Company
   2. B.The mutual fund distributors
   3. C.Unitholders
   4. D.Trustees of the mutual fund
   Show the answer

   Answer: C. Unitholders

   Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are the investors who invest in various schemes of the mutual fund, called unit-holders.

   And the consequence for the trustees: the Trust acts through its trustees. Therefore, the role of protecting the interests of the beneficiaries (investors/unit-holders) is that of the Trustees.

   Trustees hold and protect; they do not benefit. That is what makes option D wrong.

   The structure in outline: mutual funds are constituted as Trusts. Therefore, they are governed by the Indian Trusts Act, 1882. The mutual fund trust is created by one or more Sponsors, who are the main persons behind the mutual fund business.

   The governing document: the operations of the mutual fund trust are governed by a Trust Deed, which is executed between the sponsors and the trustees. SEBI has laid down various clauses that need to be part of the Trust Deed.

   And its registration: the instrument of trust is in the form of a deed, duly registered under the provisions of the Indian Registration Act, 1908, executed by the sponsor in favour of the trustees named in such an instrument.

   Two Acts to keep apart — the Indian Trusts Act, 1882 governs the trust; the Indian Registration Act, 1908 registers the deed.

   The purpose of the whole arrangement: the structure... has inherent checks and balances to protect the interests of the investors.

4. Question 4 · Chapter 4: Mutual fund products for the new cadre of distributors

   Which of the following scheme categories is permitted to be distributed by the new cadre of distributors?

   1. A.All Government Securities Schemes
   2. B.Index schemes
   3. C.Credit Risk Schemes
   4. D.Arbitrage Schemes
   Show the answer

   Answer: B. Index schemes

   These new cadre distributors can sell only simple and performing schemes. Such products include: 1. Liquid / money market schemes · 2. Index schemes · 3. Diversified equity schemes · 4. Retirement benefit schemes having tax benefits · 5. Fixed Maturity Plans (FMPs).

   Government securities schemes, credit risk schemes and arbitrage schemes are not on the list.

   And membership of the list is not enough by itself: these products should have returns equal to or better than their scheme benchmark returns during each of the last three years.

   Note "each of the last three years" — not the three-year average.

   Who the new cadre are: 1. Postal agents, 2. Retired government and semi-government officials (class III and above or equivalent) with a service of at least 10 years, 3. Retired bank officers with a service of at least 10 years, and 4. Other similar persons (such as bank correspondents) as may be notified by AMFI/AMC from time to time.

   And how a distributor knows which schemes qualify: the Asset Management Companies (AMCs) are required to publish a list of such simple and performing schemes on their websites to enable the new cadre of distributors to distribute these schemes to their clients.

   Why an index scheme belongs on a "simple" list: an index fund is also called a passive fund, since the fund manager need not actively manage the portfolio, which only mirrors the composition of the underlying index, and since the index fund tracks the underlying index, it becomes easy for an investor to understand and track the performance of the scheme.

5. Question 5 · Chapter 5: Scheme Related Information

   "Please read the scheme related documents carefully" — which documents does this line refer to?

   1. A.Scheme Information Document and the audited balance sheet of the AMC
   2. B.Trust deed and Key Information Memorandum
   3. C.Statement of Additional Information and the fund factsheet
   4. D.Scheme Information Document and Statement of Additional Information
   Show the answer

   Answer: D. Scheme Information Document and Statement of Additional Information

   The scheme related documents are the Scheme Information Document (SID) and the Statement of Additional Information (SAI). The Key Information Memorandum (KIM) is a separate, related document — a summary of the two — that must accompany every application form.

   Option A brings in the AMC's balance sheet, which is not a scheme related document. Option B brings in the trust deed, which belongs to the legal structure of the fund (Chapter 3), not to the offer of a scheme. Option C mixes in the fund factsheet, which is not even a mandatory document — publishing it is voluntary market practice under AMFI best practice guidelines.

Frequently asked questions

What is the passing mark for NISM Series V-B?

You need 50% to pass NISM-Series-V-B: Mutual Fund Foundation. On a 50-mark paper that is 25 marks.

Is there negative marking in NISM Series V-B?

There is no negative marking, so never leave a question blank — an uncertain guess costs you nothing.

How long is the NISM Series V-B exam?

The exam runs for 120 minutes and carries 50 marks in total.

How long is the NISM Series V-B certificate valid?

NISM certifications are generally valid for 3 years from the date of passing, after which they must be renewed. Confirm the current position on nism.ac.in before your certificate lapses.