Money Management Quiz 2: Test Your Skills

Question 1 · Risk & return

Over long periods, which investment has historically offered higher returns — along with higher short-term ups and downs?

ACash at homeBFixed depositCSavings accountDEquity (shares and equity mutual funds)

Question 2 · Mutual funds

What is a mutual fund?

AA type of insuranceBA government lotteryCA pool of money from many investors, managed by professionals and invested in shares, bonds or other assetsDA bank fixed deposit

Question 3 · Mutual funds

What does the NAV of a mutual fund represent?

AThe minimum investment amountBThe fund’s guaranteed returnCThe fund manager’s salaryDThe value of one unit of the fund

Question 4 · Mutual funds

An index fund aims to:

AGuarantee capital protectionBBeat the market by picking the best stocksCCopy the performance of a market index such as the Nifty 50, at low costDInvest only in gold

Question 5 · Compounding

Asha starts investing ₹5,000 a month at 25. Ravi starts the same at 35. Both stop at 60 and earn the same return. Who is likely to have a bigger corpus?

ABoth will have exactly the sameBAsha — the extra 10 years of compounding can make a very large differenceCRavi, because he is olderDImpossible to say

Question 6 · Savings schemes

What is the lock-in period of a PPF (Public Provident Fund) account?

A3 yearsB5 yearsC15 yearsDNo lock-in

Question 7 · Asset classes

What role does gold usually play in a portfolio?

AGuaranteed high returnsBMonthly incomeCDiversification and a hedge during market or currency stressDTax-free salary

Question 8 · Risk

Which factor most increases the amount of risk you can sensibly take in an investment?

AHaving high-interest debtBHaving no emergency fundCNeeding the money next monthDA long time horizon before you need the money

Question 9 · Asset allocation

What is “asset allocation”?

ABuying a houseBPicking a single stockCChoosing a bankDDeciding how to divide your money between asset classes like equity, debt and gold

Question 10 · Rebalancing

Your target is 60% equity / 40% debt. After a market rally, equity is now 75%. Rebalancing means:

ADoing nothing everBSelling some equity (or adding to debt) to return to 60/40CBuying more equityDMoving everything to cash

Question 11 · Costs

Two similar funds earn the same before costs. Fund A charges 0.5% a year and Fund B 2% a year. Over 20 years:

ACosts only matter in the first yearBThere is no differenceCFund B will be better because it is more expensiveDFund A will likely leave you with noticeably more money

Question 12 · Mutual funds

What is the main difference between a “direct” and a “regular” plan of the same mutual fund?

AThe direct plan has a lower expense ratio because no distributor commission is paidBDirect plans are only for companiesCThey invest in different sharesDRegular plans are tax-free

Question 13 · Behaviour

The market falls 20%. What happens to your monthly SIP?

AYou lose all your moneyBIt buys fewer unitsCThe same amount buys more units at lower pricesDIt stops automatically

Question 14 · Liquidity

What does “liquidity” mean for an investment?

AHow much interest it paysBHow risky it isCWhether it is made of waterDHow quickly and easily it can be turned into cash without a big loss

Question 15 · Asset classes

Which is a key drawback of real estate as an investment?

AIt is illiquid and needs large amounts of money in one assetBIt can never rise in valueCIt is not allowed in IndiaDIt pays no rent

Question 16 · Safety

Bank deposits in India are insured by DICGC up to what amount per depositor per bank?

A₹1 lakhB₹5 lakhC₹50 lakhDUnlimited

Question 17 · Tax-saving

What is the lock-in period of an ELSS (tax-saving) mutual fund?

A1 yearB3 yearsC5 yearsD15 years

Question 18 · Investing

For a beginner with ₹5,000 a month, which is usually the simpler, more diversified way into equity?

AA diversified equity or index mutual fund via SIPBBuying one company’s sharesCIntraday tradingDFutures and options

Question 19 · Inflation

Which asset class has the best record of beating inflation over the long term?

ASavings accountBLottery ticketsCEquityDCash

Question 20 · Compliance

Before investing in mutual funds in India, you must complete:

AKYC (Know Your Customer)BA passport applicationCAn income-tax auditDA driving test

Question 21 · Compounding

Two deposits pay 8% a year. One compounds quarterly, the other annually. Which earns more?

AQuarterly compoundedBAnnually compoundedCDepends on the bankDThey earn exactly the same

Question 22 · Markets

A “bear market” is a period when:

APrices are rising stronglyBMarkets are closedCOnly gold is tradedDPrices fall significantly, often 20% or more from a peak

Question 23 · Mutual funds

In the “growth” option of a mutual fund:

AYou get a fixed interest rateBProfits stay invested and show up as a rising NAVCProfits are paid out every monthDYour units double every year

Question 24 · Behaviour

Investing in something only because “everyone is buying it” is known as:

ARebalancingBHerd behaviour (FOMO)CDiversificationDAsset allocation

Question 25 · Goals

Which is the best example of a “SMART” financial goal?

A“Spend less someday”B“I want to be rich”C“Buy shares when they go up”D“Save ₹6 lakh for a car down-payment in 3 years by investing ₹15,000 a month”

Test your Money Management Skills — Quiz 2

Before you start