Interview Questions.

Top 100+ Mutual Fund Interview Questions And Answers


Top 100+ Mutual Fund Interview Questions And Answers

Question 1. Tell Me It Is Said That Smile And Patience Are Two Vital Aspects Of A Job. What Is Your Opinion?

Answer :

Yes, it is certainly right. 

You have to have a pleasant character so that you can galvanize your client. Make sure which you communicate to them with a smile for your face. It will create a pleasant ecosystem between you and your customer. Your one smile can make them feel at ease. 

Having persistence is any other vital component of a income process. You meet clients with specific attitude each day. Attend to their queries patiently. Do no longer explicit any sort of dissatisfaction. Always remember, having staying power will give exact consequences at the stop.

Question 2. What Is Growth Investing ?

Answer :

A popular investment style wherein fund managers identify agencies showing promise of above-common earnings. Stocks are held mainly for charge appreciation as opposed to dividend income. Growth buyers (or managers) are willing to pay a top class to collect a inventory if they experience it has the right potentialities. Growth investing is an opportunity to cost making an investment. For example, shopping for an over-valued software program inventory would be the a part of a increase supervisor’s funding method.

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Question three. What Is Value Investing?

Answer :

As opposed to boom traders, price buyers (or managers) recognition on figuring out under-priced stocks. Value investors look out for stocks selling at low prices, but that have the capacity to offer attractive returns in destiny.

Question four. What Is Hedging?

Answer :

A wellknown time period used to explain any of numerous risk-discount strategies. A fund supervisor may partially hedge towards a marketplace decline genuinely via transferring a larger fraction of the portfolio into cash. Alternatively, the manager ought to promote stock-index futures contracts. If the marketplace falls, the gains on the shorted futures might extra or much less offset the decline in the portfolio's value.

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Question five. What Is Passive Investing?

Answer :

This is the investment style espoused by index fund managers who without a doubt invest with the aid of benchmarking their portfolio to a commonplace stockmarket index like the BSE-30 or the SP CNX-50. The fund manager simplest invests in shares in the index in precisely the identical proportion. There is no try to beat the benchmark index, however to truely mirror it, and consequently it's miles known as as passive investing. The index fund will never outperform the benchmark index, nor does it attempt to.

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Question 6. What Is The Portfolio Turnover Of A Fund Supposed To Mean?

Answer :

A degree of the amount of buying and selling activity in a fund.Turnover is defined as the lesser of securities offered or purchased throughout a year divided via the average of month-to-month net belongings. A turnover of one hundred percentage, for example, implies positions are held on average for about a yr.

Question 7. How Are Mutual Funds Classified?

Answer :

Mutual Funds may be categorized into the subsequent 3 huge classes:

Portfolio class
Functional classification
Geographical category
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Question 8. How Are Mutual Funds Classified Based On Their Portfolios?

Answer :

Growth Funds

Investment objective: Capital appreciation of fairness shares

Investment road: Equity stocks of groups with high growth capability

For eg. Morgan Stanley Growth Fund 

Income Funds

Investment goal: Providing protection of investments and everyday income

Investment street: Bonds, debentures and different debt associated contraptions in addition to fairness stocks of corporations with high dividend payouts. There are 2 factors of income funds viz. Low funding risk with regular income and high investment threat producing excessive income.

For eg. Templeton Income Fund 

Balanced Funds

Investment goal: Modest risk of investment and reasonable rate of go back

Investment road: Judicious mix of fairness shares, choice stocks in addition to bonds, debentures and different debt related instruments.

For eg. GIC Balanced Fund 

Money Market Mutual Funds (MMMFs)

Investment goal: To take advantage of the volatility in interest fees in the money marketplace

Investment Avenue: Certificate of deposits (CDs), name cash market, commercial papers. Investors can participate in a roundabout way inside the cash marketplace via MMMFs.

For eg. IDBI-PRINCIPAL Money Market Fund 1997 

Specialised Funds

Investment Objective: To take advantage of conditions in a selected sector or a specific earnings generating security

Investment Avenue: Specialised investments in securities of corporations in sure sectors or specific income generating securities

For eg. Kothari Pioneer's Internet Opportunities Fund 

Leveraged Funds

Investment objective: To growth the value of the portfolio and benefit the shareholders through profits exceeding the price of borrowed budget

Investment avenue: Speculative and unstable investments, like quick income to take advantage of declining marketplace. Not commonplace in India

Index Funds

Investment Objective: To growth the fee of the portfolio consistent with the benchmark index (for eg. BSE Sensex, SP CNX 50)

Investment Avenue: Investments best in those stocks that shape a part of the benchmark index, in precisely the equal share, so that the value of the index fund varies in share with the benchmark index.

For e.G. UTI Nifty Index Fund 

 Hedge Funds

Investment Objective: To hedge dangers so one can increase the price of the portfolio

Investment Avenue: Employ speculative buying and selling principles - purchase growing shares and promote stocks whose charges are likely to fall.Not common in India

Question nine. How Are Mutual Funds Classified Functionally?

Answer :

Functional type of mutual funds is carried out on the following basis:

Open ended scheme 

Investors below this scheme are loose to enroll in the fund or withdraw from the fund at any time after an initial lock-in length. Such price range announce sale and repurchase fees occasionally. In an open-ended scheme, buyers can resell gadgets inside the fund to the issuing mutual fund on the net asset value (NAV) of the devices. This is due to the fact open-ended schemes are accepted to shop for/promote their own units. For e.G. Alliance Capital 1995 Fund 

Close-ended scheme 

Unlike the open-ended schemes, close-ended schemes do no longer trouble gadgets for repurchase redemption on a periodic basis. Its gadgets may be redeemed handiest on termination of the scheme, or through dealings inside the secondary marketplace. In such schemes, the duration of the scheme is particular on the outset. They have a particular target amount for the budget and can't sell greater after initial imparting. For eg. UTI Mastergain 1986

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Question 10. How Are Mutual Funds Classified Geographically?

Answer :

Mutual funds can be categorised geographically on the following basis:

Domestic funds 

Domestic fund houses release price range, which mobilise savings of the nationals in the u . S .. These schemes may want to fall beneath any of the categories referred to beneath portfolio type and practical category. Schemes launched by way of Indian MFs like GIC MF, UTI LIC MF, SBI MF, Canbank MF, Bank of Baroda MF, Bank of India MF, Morgan Stanley, Templeton, Alliance. 

Offshore Funds 

Offshore funds can put money into securities of foreign groups, after requisite permission from RBI. The goal at the back of launching offshore finances is to attract overseas capital for funding within the country of the issuing organisation. These finances facilitate go border fund glide, that's an immediate route for getting foreign forex. From the funding factor of view, Offshore price range open up home capital markets to the international buyers and international portfolio investments.



Question eleven. What Are The Different Plans That Mutual Funds Offer?

Answer :

Mutual Funds in an effort to cater to quite a number investors, have numerous funding plans. Some of the vital investment plans include:

Growth Plan 

Under the Growth Plan, the investor realises most effective the capital appreciation on the investment (by way of an growth in NAV) and does not get any income within the form of dividend. 

Income Plan 

Under the Income Plan, the investor realises earnings inside the form of dividend. However his NAV will fall to the quantity of the dividend. 

Dividend Re-funding Plan 

Here the dividend amassed on mutual funds is robotically re-invested in purchasing additional units in open-ended funds. In most cases mutual budget provide the investor an choice of collecting dividends or re-investing the equal. 

Systematic Investment Plan (SIP) 

Here the investor is given the choice of preparing a pre-decided range of submit-dated cheques in favour of the fund. He gets units at the date of the cheque at the present NAV. For example, if on 25th March, he has given a publish-dated cheque for June 25th, he will get devices on twenty fifth June at existing NAV.

Systematic Withdrawal Plan 

As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the power to withdraw a pre-decided amount/gadgets from his fund at a pre-determined interval. The investor’s devices will be redeemed at the prevailing NAV as on that day.

Retirement Pension Plan 

Some schemes are linked with retirement pension. Individuals take part in these plans for themselves, and corporates for his or her employees.

Insurance Plan 

Some schemes launched through UTI and LIC provide coverage cover to traders.

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Question 12. What Is A 401(ok) Plan?

Answer :

A popular contribution software within the USA, to be had thru many employers. Within these tax-sheltered plans, contributors often can pick mutual funds as one or greater of the investment picks.

This plan (or even a variation) is yet to be introduced in India.

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Question 13. What Are The Advantages Of Investing In A Mutual Fund?

Answer :

Investors are uncovered to reduced investment danger due to portfolio diversification, economies of scale in transaction price and professional management.

Limited Risk 

Investors are exposed to decreased funding threat because of portfolio diversification, economies of scale in transaction cost and expert management. 

Diversified funding 

Small traders can take part in larger basket of securities and percentage the benefits of effectively controlled portfolio by way of experts, and are freed from preserving records of employer percentage certificate, and tracking tax policies. Mutual fund investments are less risky due to portfolio diversification, which is viable specially because of huge price range available at their disposal. Small traders can never spread their dangers across this kind of wide portfolio, as can mutual budget. 

Freedom from tracking investments 

Investors do not ought to tune their investments often, as the tracking is finished by using experts who purchase and sell securities for them. Investors are best required to song the performance of the mutual fund.

Professional management 

Mutual budget are run through specialists, with enjoy in portfolio management. Analysts employed by way of mutual funds analayse facts and records to be had in a way that cannot be matched through the lay investor. 

Tax blessings 

Income tax advantages are granted to traders in mutual finances, making it greater tax green in comparison to other similar investment avenues.

Question 14. Who Is A Custodian?

Answer :

The custodian, an impartial company, has the physical possession of all securities purchased by means of the mutual fund, and undertakes responsibility for its managing and safekeeping. For instance, the Stock Holding Corporation of India Ltd (SCHIL) is the custodian for maximum fund homes inside the u . S ..

Question 15. What Is An Asset Management Company (amc)?

Answer :

A tremendously regulated company that pools cash from many humans into a portfolio based to reap positive goals. Hence it is termed as an Asset Management Company. Typically an AMC manages several funds - open-end /closed-cease throughout several categories - boom, earnings, balanced. Every mutual fund has an AMC related to it. For example, Alliance Capital Mutual Fund is associated with Alliance Capital Asset Management Company Ltd.

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Question 16. What Is Load?

Answer :

It is a rate gathered by means of a mutual fund whilst it sells units. It can be either front-end load (i.E., the rate is accumulated while an investor buys the devices) or back-give up load (i.E, the rate amassed while the investor sells returned the gadgets). Some schemes do now not rate any load and are called No Load Schemes

Question 17. What Is An Ex-dividend Date?

Answer :

Normally, one commercial enterprise day after the document date. Investors purchasing unit on or after the ex-dividend date are not entitled to collect dividends or bonus devices. The NAV falls via the quantity of the dividend dispensed and/or bonus issued. The terms ex-bonus and ex-dividend frequently are used synonymously.

For example, if the record date for dividend is October 15th, then buyers who don’t have their names inside the listing of unitholders as on that day, will now not obtain dividend. This works very just like dividend and bonus declarations inside the case of shares.

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Question 18. How Does One Calculate The Expense Ratio For A Fund?

Answer :

The rate ratio for a fund is the annual charges of a fund (on the end of the economic 12 months), inclusive of the control rate, administrative expenses, divided by using the quantity of units on that day.

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Question 19. How Relevant Is The Expense Ratio?

Answer :

As is evident from the definition, a lower fee ratio underlines the efficiency of a fund. This is a yardstick that investors need to apply to gauge the efficiency (or lack of it) among budget.

Question 20. What Is Cheque-writing Facility?

Answer :

A provider enabling traders to write cheques in opposition to their mutual fund account balances. Cheques commonly ought to meet a certain minimum quantity and the carrier is confined to cash-market price range.

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Question 21. What Is A Contingent Deferred Sales Charge (or Cdsc)? What Is A Contingent Deferred Sales Charge (or Cdsc)?

Answer :

A lower back-quit load imposed on an investor if he exits from the fund earlier than a pre-determined length (say 6 months). The charges decline the longer an investor stays invested with a fund.

Question 22. What Is A Daily Dividend Fund?

Answer :

A fund (cash-market or bond) that calculates dividends each day, paying out or reinvesting the equal.

Question 23. What Are Derivatives?

Answer :

Financial units based on a few number one underlying asset or index which includes a stock, bond, commodity, or a benchmark of inventory costs. Derivative securities differ up and down in tandem with the number one safety. Derivatives frequently are leveraged, making them extra volatile. They may be used to take a position as well as to lessen or manage an undesirable risk. Options and futures are standardised derivatives. Others are customised to meet specific desires.

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Question 24. What Is An Initial Public Offering (ipo)?

Answer :

The sale of a organization's stocks or a fund house’s mutual fund to investors for the primary time.

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Question 25. What Is An Asset Management Fee?

Answer :

The rate charged by means of the asset control corporation (AMC) for portfolio control. The charge charged on an annual basis is calculated as percent of net belongings under management.