📊 NISM Series XXI-A Chapter 9 of 12 ⚖ 15 of 100 marks weightage

Ch.9: Portfolio Management Process

Practice questions for NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination, Chapter 9: Portfolio Management Process. This chapter walks through how a portfolio is actually built and kept on track. It starts with why the asset allocation decision dominates long-run results and how correlation drives diversification, then follows the process from the Investment Policy Statement, risk profiling, objectives, constraints and financial analysis to benchmarking. It ends with strategic, tactical and factor-based allocation and the why, benefits and pitfalls of rebalancing. Carries 15 out of 100 marks. The exam has 100 MCQs, 60% passing score, and −10% negative marking per wrong answer.

What You Will Learn in This Chapter

Why asset allocation is treated as the single most important driver of long-run portfolio performance.
How correlation between -1 and +1 determines how much diversification benefit two assets provide.
The four-step, planning-execution-feedback portfolio management process built around the Investment Policy Statement (IPS).
How risk profile, objectives, constraints, goals and net worth feed the asset allocation decision, and how PMS benchmarking works through strategies and investment approaches.
The differences between strategic, tactical and factor-based asset allocation, and the needs, benefits and challenges of rebalancing.

Key Terms:Asset allocationCorrelation coefficientInvestment Policy Statement (IPS)Risk tolerance vs risk capacityLiberalised Remittance Scheme (LRS)Investment approach (IA)Strategic Asset Allocation (SAA)Tactical Asset Allocation (TAA)Smart betaRebalancing

Free Sample Question

Q1MCQMediumIPS purpose

Which of the following is a stated purpose of the IPS?

✓Providing a framework for evaluating the portfolio manager's performance

BGuaranteeing a minimum annual return to the investor

CFixing a uniform fee for all clients of the portfolio manager

DReplacing the need for a written PMS agreement between the manager and the client

💡 Key purposes include setting realistic expectations, structuring decisions and providing a performance evaluation framework for the manager.

119 more questions in this chapter

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About this content: These practice questions are written by BullWiser from the syllabus of the NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination, using the workbook published by the National Institute of Securities Markets (NISM), Mumbai (September 2025 edition) as the fact source. NISM is a SEBI-established institution. Questions cover Chapter 9: Portfolio Management Process with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM, SEBI or APMI. Last updated: September 30, 2026.

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