NISM Series X-A · Unit 4 of 12 · about 12% of the paper
Investment products: NISM Series X-A notes and practice questions
The shelf of products an adviser can use: deposits, small savings, bonds, equity, gold, real estate, REITs, PMS, AIFs and structured products.
What to know in Unit 4
- Features, risk, return, liquidity and tax of each product.
- Which product suits which goal.
Key terms, examples and exam traps
Fixed deposit
A fixed deposit gives a fixed return for a fixed period, with capital safety up to the deposit insurance limit and interest taxable at slab rates.
Example. A saver locks a sum for three years at a known rate.
Exam trap. This statement is false: A fixed deposit gives market-linked returns.
Deposit insurance
Deposit insurance covers bank deposits up to ₹5 lakh per depositor per bank in case of bank failure.
Example. A depositor holds ₹8 lakh in one bank, with ₹5 lakh insured.
Exam trap. This statement is false: All deposits of any amount are fully insured.
Public Provident Fund
PPF is a government-backed small savings scheme with a 15-year tenure, tax benefits on deposit and interest, and limited premature withdrawal.
Example. A long-term saver builds a tax-efficient corpus over fifteen years.
Exam trap. This statement is false: PPF can be fully withdrawn after one year.
Sukanya Samriddhi Yojana
The Sukanya Samriddhi account is a small savings scheme for the girl child with tax benefits and a long lock-in until maturity or marriage after 18.
Example. A parent opens an account for her daughter's education and marriage.
Exam trap. This statement is false: Sukanya Samriddhi is available for any child.
Senior Citizens' Savings Scheme
SCSS is a government-backed scheme for those aged 60 and above with a five-year tenure, offering regular interest payouts.
Example. A retiree places a lump sum for regular quarterly income.
Exam trap. This statement is false: SCSS is open to any age.
Sovereign gold bond
A sovereign gold bond is a government security denominated in grams of gold that pays interest and has no storage or purity issues, with a defined tenure.
Example. An investor holds gold on paper, backed by the government, and earns annual interest.
Exam trap. This statement is false: A sovereign gold bond pays no interest.
Gold ETF
A gold ETF is a fund that holds physical gold and trades on an exchange, giving gold exposure without storage.
Example. An investor buys units of gold in a demat account.
Exam trap. This statement is false: A gold ETF offers jewellery on redemption.
Equity share
An equity share offers ownership and growth potential, dividends and voting rights, but with the highest risk among common products.
Example. A client wants long-term growth and can bear volatility.
Exam trap. This statement is false: Equity gives assured returns.
REIT
A REIT owns and operates income-producing real estate and distributes most of its income to unit holders, listed on exchanges.
Example. An investor holds units in a trust that owns office buildings.
Exam trap. This statement is false: A REIT invests in debt instruments of companies.
InvIT
An InvIT pools money to invest in infrastructure assets such as roads and power lines and distributes income to unit holders.
Example. An investor buys units in a trust that owns toll roads.
Exam trap. This statement is false: An InvIT invests only in residential flats.
Real estate
Real estate offers appreciation and rental income but is illiquid, high in ticket size and costly to transact.
Example. A client finds it hard to sell a property quickly.
Exam trap. This statement is false: Real estate is a liquid investment.
PMS
Portfolio management services manage a client's portfolio of securities in a segregated account, with a minimum investment of ₹50 lakh.
Example. A wealthy client hands over a securities portfolio to a professional manager.
Exam trap. This statement is false: PMS has no minimum investment.
Alternative investment fund
An AIF is a privately pooled fund investing in non-traditional assets and strategies, with a minimum investment of ₹1 crore.
Example. An investor puts ₹1 crore into a private equity fund.
Exam trap. This statement is false: An AIF accepts investments of ₹10,000.
Structured product
A structured product combines a debt instrument with a derivative to deliver a customised payoff, and may carry high complexity and issuer risk.
Example. A product offers returns linked to an index with partial capital protection.
Exam trap. This statement is false: Structured products are simple and risk free.
NPS as a product
NPS is a defined-contribution pension scheme invested in equity, corporate bonds and government securities, with a partly mandatory annuity at exit.
Example. A person builds a retirement corpus with regulated pension fund managers.
Exam trap. This statement is false: NPS is a mutual fund.
Bonds and debentures
Bonds are debt instruments paying interest and returning principal at maturity; yields depend on credit quality and tenure.
Example. A client receives coupons and principal on a corporate bond.
Exam trap. This statement is false: Bond returns are linked to company profits.
Annuity
An annuity is a series of regular payments, usually from an insurer, bought with a lump sum, to provide income in retirement.
Example. A retiree pays a lump sum and receives monthly income for life.
Exam trap. This statement is false: An annuity pays a single lump sum at maturity.
Unit linked insurance plan
A ULIP combines insurance with market-linked investment, with charges for mortality, administration and fund management.
Example. A policy invests part of the premium in funds and part in cover.
Exam trap. This statement is false: A ULIP has no charges.
Corporate fixed deposit
A corporate fixed deposit is a deposit with a company at a higher rate than banks, with higher risk and no deposit insurance.
Example. A client considers a company deposit for its higher interest.
Exam trap. This statement is false: Company deposits are insured like bank deposits.
Recurring deposit
A recurring deposit lets a saver deposit a fixed sum every month for a fixed term, earning a fixed interest rate.
Example. A saver puts ₹5,000 monthly into a bank for two years.
Exam trap. This statement is false: A recurring deposit needs a single lump sum at the start.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which statement best describes “Sovereign gold bond”?
- A trust holds assets for beneficiaries under a trustee's control, and is used for succession, protection and management of wealth.
- Retiring earlier needs a bigger corpus because savings must last more years with fewer years of accumulation.
- A sovereign gold bond is a government security denominated in grams of gold that pays interest and has no storage or purity issues, with a defined tenure.
- Tax-loss harvesting means selling investments at a loss to set off against gains, reducing the tax payable.
Q2. Which term is described here? A REIT owns and operates income-producing real estate and distributes most of its income to unit holders, listed on exchanges.
- Equity fund categories
- Behavioural biases
- REIT
- Fee modes
Q3. Which term is described here? A structured product combines a debt instrument with a derivative to deliver a customised payoff, and may carry high complexity and issuer risk.
- Portfolio overlap
- Structured product
- Free-look period
- Tax on mutual funds
Q4. Which statement best describes “InvIT”?
- A Hindu Undivided Family is a separate taxable entity consisting of family members from a common ancestor, which can hold assets and file its own return.
- An InvIT pools money to invest in infrastructure assets such as roads and power lines and distributes income to unit holders.
- PPF is a government-backed small savings scheme with a 15-year tenure, tax benefits on deposit and interest, and limited premature withdrawal.
- Active investing tries to beat a benchmark through selection; passive investing tracks it at low cost.
Q5. Which statement best describes “Gold ETF”?
- A non-individual adviser must appoint a principal officer with prescribed qualifications and a compliance officer to ensure compliance.
- A gold ETF is a fund that holds physical gold and trades on an exchange, giving gold exposure without storage.
- Registered advisers must undergo an annual compliance audit and submit reports as required.
- A will is a legal document by which a person decides how her property is to be distributed after death, and it takes effect only on death.
Q6. Which term is described here? Real estate offers appreciation and rental income but is illiquid, high in ticket size and costly to transact.
- Record keeping
- Core and satellite
- Real estate
- Financial plan review
Frequently asked questions
How much of NISM Series X-A comes from Unit 4?
Unit 4 (Investment products) usually carries about 12% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series X-A Unit 4?
Features, risk, return, liquidity and tax of each product. Which product suits which goal.
Are these NISM Series X-A practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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