Financial Markets and Instruments

Unit holders are responsible for monitoring their investments, staying informed about material information, and studying the offer document. However, they do NOT make investment decisions about where the fund manager should invest - that is the fund manager's professional responsibility. Unit holders invest FOR the manager's expertise.

A no-load mutual fund does not charge any sales commission or load to investors when buying or selling fund units. The fund house absorbs the initial issue expenses and other costs associated with creating and managing the fund rather than passing them on to investors through entry or exit loads.

CDSC (Contingent Deferred Sales Charge) is an exit load that decreases as the holding period increases, incentivizing long-term investments. Entry loads are charged at purchase, not at redemption.

All listed options (A, B, C) are actual advantages of mutual funds: professional management provides expertise at scale, diversification spreads risk, and liquidity allows easy redemption. Since the question asks what is NOT an advantage, and none of these qualify as disadvantages, 'None of the above' is correct.

Option A is false (open-ended funds are NOT sold in secondary market - they're bought/sold directly from the AMC). Option B is false (closed-ended funds DO have fixed tenure). Option C is false (open-ended funds MUST calculate NAV daily). Only D is true - SEBI mandates closed-ended funds calculate NAV at least weekly, making it 'not false'.

 A mutual fund can benefit from economies of scale because of large volumes of trade

When schemes are taken over, offer documents must be updated (A), the AMC changes (B), and the sponsor may change (C). However, schemes do NOT need to be wound up - they continue under the new mutual fund.

Dividend payout does not give compounding benefits because dividends are paid out to the investor. Growth (A) and dividend reinvestment (C) both compound - growth keeps funds invested, reinvestment uses dividends to buy more units.

Transfer agents handle administrative tasks like issuing/redeeming units (A), updating records (B), and preparing transfer documents (C). They do NOT invest funds in securities - that's the AMC's job.

AMCs can provide advisory services (A), invest in government paper (B), and invest in listed securities (D). They CANNOT indulge in activities unrelated to financial services - their mandate is restricted to financial activities.

SEBI regulations require fund sponsors to hold at least 40% of the Asset Management Company's (AMC) net worth. This ensures the sponsor has significant financial commitment and skin in the game, aligning their interests with those of investors. The 40% threshold is a minimum requirement, not an exact figure like 50%.

Fund sponsors must demonstrate a sound financial track record of 5 years to establish their credibility and capability to support the AMC. This requirement ensures sponsors have proven financial stability and experience before being permitted to sponsor mutual funds. The 5-year period balances the need for experience without being excessively restrictive like 7 years, or too short like 1-3 years.

Index funds ARE inherently diversified because they invest in all securities constituting a particular index, which typically includes 30-50 different stocks (e.g., Nifty has 50 stocks). Saying index funds are 'not diversified' is factually incorrect. The other statements about index funds - that they invest in index shares, in the same proportion as the index, and aim to minimize tracking error - are all true characteristics. Option D correctly identifies the false statement.

This question asks which statement is NOT true. Options A, B, and D are all true statements about mutual funds - they ARE owned by all investors, they DO provide diversified portfolios, and they DON'T invest in real estate (they invest in securities). Option C claims investor objectives are diverse, which is FALSE - mutual funds are designed for investors with SIMILAR objectives (growth, income, etc.) as stated in the scheme's mandate. Therefore, C correctly identifies the statement that is 'not true'.

A closed-end mutual fund has a fixed tenure or maturity period, unlike open-end funds which are perpetual. The fund launches with a fixed corpus, and investors can only redeem units at maturity. NAV fluctuates based on market values, returns are not guaranteed, and distributor networks can vary.