Mutual Fund Mastery interview preparation

Questions

100

Traced to a firm

32

Firms

19

Updated

September 2026

Asked at

All firmsVanguard5BLBlackRock3FTFranklin Templeton3Invesco3PIMCO3Fidelity Investments2J.P. Morgan2Morningstar2Neuberger Berman2SCSchroders2T. Rowe Price2Amundi1BMBNY Mellon1Goldman Sachs1Man Group1Northern Trust1SSState Street1Sycamore Partners1WMWellington Management1

Topic

All topicsFund structure and regulation7NAV and operations6Scheme categorisation4Equity schemes5Debt schemes7Risk, liquidity and disclosure7Index funds and ETFs6Hybrid and solution schemes3Costs, plans and commissions6SIP and investor mechanics5Performance measurement6Taxation5Distribution, compliance and NISM5Portfolio construction and advice5Estimation and numeracy5Markets and industry6Career and fit12

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 021A client wants mid and small cap exposure. Would you use a large and mid cap fund, or a large cap fund plus a separate mid cap fund?Equity schemesIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   Two separate funds, in almost every case. A large and mid cap fund locks you into 35 percent minimum in each and hands the remaining 30 percent to the manager, so you cannot control the exposure you came for. Two funds let you set the split and rebalance it.

   Then walk it

   1. With separate funds you decide the ratio. Want 70 large and 30 mid? You own it. In a large and mid cap fund you get whatever the manager chooses inside the 35-35 floor, and it drifts.
   2. You also get to rebalance mechanically. After a mid cap run-up you can trim back to target, which is the single highest-value thing a retail portfolio does. Inside a single fund that rebalancing happens at the manager's discretion, if at all.
   3. And you can choose differently by segment: index the large cap sleeve at 5 to 15 basis points, pay active fees only on the mid cap sleeve where dispersion between managers is genuinely wide.
   4. The case for the single fund is real but narrow. For a small portfolio, one folio is simpler, rebalancing inside the fund is not a taxable event, and it removes the behavioural risk of a client who panics and stops the mid cap SIP in a drawdown.
   5. Put a number on the tax point: shifting 5 lakh between two schemes to rebalance can trigger 12.5 percent on the gain above the exemption. Inside one fund the manager rebalances tax-free at the scheme level.
   6. So my answer: two funds for a portfolio above roughly 10 lakh where the client will actually rebalance, one large and mid cap fund for a smaller or behaviourally fragile investor. And say which assumption drives the choice, because that is the actual judgement.

   Where candidates lose it

   Answering purely on structure and ignoring tax and behaviour. The interviewer is testing advisory judgement, not category recall. Also, do not forget that rebalancing across schemes is a taxable redemption in India — a US-trained answer misses this entirely.

   Expect next

   • How would you rebalance without triggering tax?
   • How many funds should this client end up with in total?
   • Would you index the large cap portion?
2. 022When does a sectoral or thematic fund belong in a portfolio?Equity schemesIntermediatetechnicalDistribution and salesProduct and strategy roles

   Say this

   Rarely, and only as a small satellite for an investor who has an explicit view and a defined exit. Eighty percent in one sector means you have taken the diversification out of a diversified product, and the category's flow pattern shows investors buy these at exactly the wrong time.

   Then walk it

   1. The mandate is the risk: minimum 80 percent in the stated sector or theme, so the manager cannot de-risk even if he thinks the sector is expensive. You have hired a stock picker and removed his asset allocation decision.
   2. Sector returns are far more dispersed than market returns. Indian pharma, IT and PSU banking have each had three-year stretches of both severe underperformance and violent outperformance. A five-year hold in the wrong entry year can leave you behind a plain index fund.
   3. The flow evidence is damning. NFOs and inflows into a theme peak after the theme has already run, because that is when the one-year return on the fact sheet looks irresistible. The investor return in these categories is systematically worse than the fund return.
   4. Where it is legitimate: a genuine view you can articulate and falsify, sized at 5 to 10 percent of the equity allocation, with a written exit condition. Or a structural exposure the investor cannot get elsewhere, such as an international theme.
   5. It is also the category with no one-scheme-per-AMC limit, which is exactly why the industry launches so many of them. Knowing that link between the regulation and the sales pipeline is the mark of someone who understands the business.
   6. So what I would actually say to a client: if you cannot tell me what would make you sell it, you are not making a thematic investment, you are chasing a fact sheet.

   Where candidates lose it

   Either dismissing the whole category or selling it enthusiastically. Both are wrong. The answer an AMC or a distributor wants is a sizing rule, an exit condition, and an honest statement that category flows prove retail investors time these badly.

   Expect next

   • Why does SEBI allow multiple thematic schemes per AMC?
   • How would you size a thematic position?
   • What is the difference between a sectoral and a thematic fund?
3. 028A corporate treasurer has 40 crore of surplus he will need in about 45 days. Overnight fund, liquid fund or money market fund?Debt schemesIntermediatecase studyCorporate treasury desksIndian AMCs

   Say this

   Liquid fund, for a 45-day horizon. Overnight gives up yield for liquidity he does not need, and a money market fund holds paper out to a year, so it carries mark-to-market risk over a window this short. Liquid caps residual maturity at 91 days, which roughly matches the horizon.

   Then walk it

   1. Overnight funds hold one-day paper, so there is effectively no rate risk and no credit risk, but the yield is the lowest of the three. That is the right answer for money he might need tomorrow, not in 45 days.
   2. Liquid funds hold paper up to 91 days residual maturity. Since the move to full mark to market the NAV does move, but with average maturity under about 60 days the sensitivity is small — a 25 basis point move costs a few basis points of NAV.
   3. Money market funds can hold up to one year. That extra duration earns maybe 20 to 40 basis points more in a normal curve, but over 45 days a rate spike can wipe out more than the extra carry.
   4. Watch the graded exit load on liquid funds for redemptions inside seven days, introduced after the 2019 stress. Redeeming on day 3 costs a small penalty; by day 45 it is irrelevant. Say this, because treasurers ask.
   5. Then the operational detail that actually matters to a treasurer: the 1:30 pm purchase cut-off and the realisation rule. Funding by RTGS in the morning gets him the previous day's NAV; a 2 pm transfer loses a day, which on 40 crore at 6 percent is about 66,000 rupees.
   6. One check before recommending: the scheme's top-10 investor concentration. A liquid fund where three corporates hold 60 percent of AUM is a fund where someone else's quarter-end redemption becomes his problem.

   Where candidates lose it

   Answering with the highest-yielding option. Treasury money is about certainty of principal on a known date, not yield. And if you do not mention the 1:30 pm cut-off and the seven-day exit load, an institutional sales interviewer will conclude you have never spoken to a treasurer.

   Expect next

   • Now he says he might need it on any day with 24 hours' notice. What changes?
   • What is the exit load structure on a liquid fund?
   • How would you check the fund's investor concentration?
4. 035A client calls, angry. His debt fund's NAV has fallen and he was told debt funds are safe. What do you say?Risk, liquidity and disclosureIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   Establish which of the two causes it is before saying anything reassuring. If it is rates, the loss reverses over time and the fund's yield has actually improved. If it is a credit write-down, the loss is permanent and the conversation is completely different. Never blend them.

   Then walk it

   1. Diagnose first: check whether the fall is broad across the category and matches a move in bond yields, or whether it is a single-day drop specific to this scheme, which almost always means a downgrade or a default.
   2. If it is rates, explain the mechanism in his language. Bond prices fall when yields rise. A fund with a modified duration of 3 loses about 3 percent when yields move up a percentage point, and it earns that back through higher accrual over roughly the duration period if he stays.
   3. If it is credit, say so plainly, tell him whether a segregated portfolio has been created, what the written-down value is, and that the recovery timeline is not in the AMC's control. Do not describe a permanent loss as temporary volatility.
   4. Then the honest part about the original advice. Debt funds are lower risk than equity, not risk-free. Since the move to full mark to market, even liquid fund NAVs move. If he was sold 'safe', he was sold badly, and admitting that protects the relationship better than defending it.
   5. Then match the product to the horizon properly. Money needed within a year belongs in liquid or money market. One to three years in short duration. Anything with duration or credit exposure requires the ability to sit through a drawdown.
   6. And a number to anchor it: over the last two decades, a short duration fund's worst twelve-month period has been a small negative, while the same period in an equity fund has been minus 40 percent. The relative claim is defensible; the absolute one never was.

   Where candidates lose it

   Reassuring first and diagnosing later. If the fall is a default and you have told him it will recover, you have destroyed your credibility and possibly created a compliance issue. Diagnose, then explain, then fix the product fit.

   Expect next

   • How would you explain duration to a 70-year-old client?
   • What if a segregated portfolio has been created?
   • How should he have been positioned in the first place?
5. 051A client holding 30 lakh in regular plans wants to move to direct plans. Walk me through the consequences.Costs, plans and commissionsIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   It is a redemption and a fresh purchase, so it triggers capital gains tax and possibly exit load, even though the scheme and the portfolio are identical. The right answer is almost never to switch everything at once — it is to stop fresh flows into regular, and move the existing corpus in tax-aware tranches.

   Then walk it

   1. The switch is two transactions. Units in the regular plan are redeemed at NAV, gains are taxable, and the proceeds buy direct plan units at that plan's NAV. There is no tax-free plan conversion in India.
   2. Cost of doing it badly: suppose 30 lakh includes 10 lakh of long-term equity gains. At 12.5 percent above the 1.25 lakh exemption that is about 1.1 lakh of tax paid today. The annual saving from 1 percent lower TER is about 30,000 rupees, so you are roughly three to four years to break even.
   3. So sequence it. First, redirect all new SIPs and lump sums into the direct plan — that is free. Second, switch the units that are already long-term and sitting on small gains. Third, use the annual 1.25 lakh exemption each year to move a tranche tax-free.
   4. Check exit load before each tranche. Anything bought in the last twelve months in an equity fund will pay 1 percent, which usually makes waiting the better choice.
   5. Then the thing nobody mentions: the moment he goes direct, the distributor relationship ends. If that distributor was the reason he stayed invested through 2020, the 1 percent was cheap. Ask what the distributor has actually been doing before advising the switch.
   6. And if he does want advice, point him at a flat-fee registered investment adviser who works in direct plans. The cost becomes visible and separable, which is the honest version of what he is trying to achieve.

   Where candidates lose it

   Treating the switch as a free administrative change. It is a taxable redemption. The candidate who quantifies the break-even in years, and who asks what the distributor was providing before removing them, is giving advice rather than reciting a cost comparison.

   Expect next

   • How would you use the annual exemption to phase it?
   • What if the holdings are in ELSS?
   • When would you tell him to stay in regular plans?
6. 067Explain tax harvesting in equity funds, and how you would do it for a client this financial year.TaxationIntermediatecase studyWealth and advisoryDistribution and sales

   Say this

   Harvesting means deliberately realising long-term equity gains up to the 1.25 lakh annual exemption and reinvesting immediately, so you reset your cost base for free. Done every year, it permanently removes a slice of future tax from the portfolio.

   Then walk it

   1. The mechanics: identify units held more than twelve months, redeem enough that the realised long-term gain is just under 1.25 lakh, then buy the same scheme back the next day. The exemption is used, no tax is paid, and the new units carry a higher cost of acquisition.
   2. Worked example: a client sits on 4 lakh of unrealised long-term gain. Harvest 1.25 lakh a year for three years and the eventual taxable gain shrinks by 3.75 lakh, saving about 47,000 rupees at 12.5 percent. That is a real return on an afternoon's work.
   3. Constraints to check before you do it. Exit load on any units under twelve months old, though by definition harvested units are older. The holding-period clock resets on the repurchased units, so do not harvest money you might need within the next year.
   4. There is no wash-sale rule in India for gains harvesting, so buying back immediately is fine. For loss harvesting the position is less settled and repeated same-day round trips in the same scheme invite scrutiny, so leave a gap and document the rationale.
   5. Loss harvesting is the other half: realise losses to set against gains, remembering short-term losses can offset both short and long-term gains while long-term losses offset only long-term. Losses carry forward eight years if the return is filed on time.
   6. The operational caution: use the exemption across the whole portfolio, not per scheme, and count listed shares and other equity assets too. And do it in January or February, not on 31 March, because an NAV date and a T plus settlement can push the transaction into the next financial year.

   Where candidates lose it

   Harvesting more than the exemption and creating a tax bill for no reason, or forgetting that the exemption is per person per year across every equity asset. The other real-world failure is leaving it to the last week of March and missing the financial year.

   Expect next

   • What is the difference between harvesting gains and harvesting losses?
   • Does a wash-sale rule apply in India?
   • When in the year would you do it and why?
7. 068Why are new fund offers usually mis-sold?Distribution, compliance and NISMIntermediatetechnicalDistribution and salesIndian AMCs

   Say this

   Because the two arguments used to sell an NFO are both false — that a 10 rupee NAV is cheap, and that getting in at the start gives you an advantage. An NFO has no track record, so you are buying a mandate and a brochure, when an existing scheme in the same category gives you five years of evidence at the same price.

   Then walk it

   1. The NAV fallacy first, because it is the commonest. A 10 rupee NAV is not cheaper than a 400 rupee NAV. The NAV is a unit of account; what matters is what the portfolio owns and at what valuation. A fund at 10 that buys the same stocks at the same prices gives the identical return.
   2. No track record is the substantive objection. You cannot see rolling returns, drawdown behaviour, portfolio construction or how the manager behaved in a crash. You are underwriting a promise.
   3. The incentive structure explains the volume. NFOs are the industry's marketing event, they get a concentrated distribution push, and historically they paid better. Even under the trail-only regime, an NFO is the one moment an AMC can mobilise the whole distribution network at once.
   4. And look at when they launch. NFO activity peaks after a category has already performed, especially in thematic and sectoral funds where the one-scheme-per-AMC rule does not apply. The launch calendar is a sentiment indicator, which is a nice thing to say to an interviewer because it is both true and uncomfortable.
   5. The legitimate exceptions: a genuinely new exposure with no existing equivalent — a new index, a new asset class, a first-of-its-kind passive product — or a closed-end structure with a defined maturity. There, the absence of a track record is unavoidable rather than a red flag.
   6. So my line to a client: if you can name an existing scheme with a five-year record doing the same thing, buy that one. If you cannot, then the NFO might be worth a look.

   Where candidates lose it

   Not being able to dismantle the 10-rupee-NAV argument cleanly. It is the single most common mis-selling line in Indian retail distribution and an interviewer at an AMC will expect you to demolish it in one sentence. Also acknowledge the legitimate exceptions, or you sound dogmatic.

   Expect next

   • So is a 10 rupee NAV ever relevant?
   • When would you actually recommend an NFO?
   • What does the NFO calendar tell you about the market?
8. 073How would you build a portfolio for a range of clients with very different needs and requirements?Portfolio construction and adviceIntermediatecase studyVanguardInvestment Research · Malvern · 2024

   Say this

   Start from the liability, not the product. For every client I need three things: when the money is needed, how much volatility they can actually tolerate as opposed to claim to tolerate, and what tax bracket and constraints they face. The asset allocation falls out of those, and fund selection is the last and least important step.

   Then walk it

   1. Horizon sets the equity share. Money needed inside three years does not belong in equity at all, whatever the client's risk appetite, because the worst three-year outcome is too bad. Beyond ten years, equity is the low-risk choice against inflation.
   2. Then capacity versus tolerance. Capacity is arithmetic — income stability, dependants, existing assets. Tolerance is behavioural. Where they conflict, size to tolerance, because a client who redeems in a drawdown converts a paper loss into a permanent one.
   3. Then build with as few products as possible. A large cap index fund, one flexi cap or mid cap, one short duration debt fund, and a liquid fund for near-term needs covers the large majority of clients. Complexity is the enemy of adherence.
   4. Differentiate at the edges, not the core. A 30-year-old with a stable salary and a 25-year horizon gets 75 to 85 percent equity with an SIP. A 60-year-old drawing income gets a bucketed structure with an SWP from the debt sleeve. A business owner with lumpy income gets a bigger liquid buffer.
   5. Then tax and jurisdiction. An Indian investor in the 30 percent bracket routes short-horizon money through arbitrage rather than debt funds. A US-taxable client cannot hold Indian mutual funds efficiently at all, and that constraint overrides every allocation view.
   6. And write down the rebalancing rule and the review date at the start. Most portfolios fail from drift and from ad hoc changes, not from bad initial selection — which is why I would rather have an average fund list with a written policy than a brilliant fund list without one.

   Where candidates lose it

   Answering with a fund list. The interviewer is testing whether you start from the client's liabilities and constraints. Also, distinguishing risk capacity from risk tolerance, and saying you would size to the lower of the two, is the line that separates an adviser from a salesperson.

   Expect next

   • What if the client's stated tolerance is much higher than their capacity?
   • How many funds should a portfolio hold?
   • How would you handle a client with a large concentrated stock position?

   Reported by candidates at Vanguard (Investment Research, Malvern, 2024). Source: Wall Street Oasis.

9. 074How would you invest 10 million pounds?Portfolio construction and adviceIntermediatesuperdaySCSchrodersAsset Management · London · 2023

   Say this

   My first move is to ask whose money it is and what it is for, because the answer is completely different for an endowment, a pension scheme and a private individual. If you want me to pick, I will assume a taxable individual with no immediate liability and a twenty-year horizon, and I will say so before I allocate a pound.

   Then walk it

   1. State the assumptions out loud: horizon, liquidity needs, tax status, base currency, existing wealth, and whether there is a spending requirement. Making them explicit is the whole test, because the interviewer wants to see if you build from a mandate.
   2. Then a defensible allocation, roughly: 55 to 60 percent global equity, mostly indexed given the size and the cost saving available; 20 percent fixed income split between government bonds and investment grade credit; 10 percent real assets, listed infrastructure and property; 5 to 10 percent in cash and near-cash for two to three years of spending.
   3. Justify the shape, not the numbers. The equity weight comes from the horizon, the bond weight is there to fund spending in a drawdown, and the real assets are for inflation exposure the bonds cannot provide.
   4. Then implementation, which is where the size actually matters. At 10 million you get institutional share classes, so total cost can come in under 20 basis points on the passive core. Fee negotiation on that scale is worth more than most manager selection decisions.
   5. Then risks and what would change my mind: currency exposure and whether to hedge the non-sterling bonds, concentration in US mega-caps in any global index today, and sequence risk if there is a spending requirement in the first five years.
   6. And a deployment plan rather than a single date. Half now, the rest over three to six months, with a written rule so it happens regardless of how markets look at the time.

   Where candidates lose it

   Allocating immediately without asking what the money is for. The question is deliberately underspecified. But do not hide behind questions either — ask two or three, state your assumptions, and then commit to an actual allocation with reasons. Refusing to give numbers reads as evasion.

   Expect next

   • Now it is a pension scheme with liabilities in fifteen years. What changes?
   • Would you hedge the currency?
   • Active or passive, and why?

   Reported by candidates at Schroders (Asset Management, London, 2023). Source: Wall Street Oasis.

10. 075Talk me through diversification. How many mutual funds does a portfolio actually need?Portfolio construction and adviceIntermediatetechnicalNorthern TrustAsset Management · Chicago · 2025

    Say this

    Four to six for almost anyone. Diversification comes from owning uncorrelated assets, not from owning many funds, and beyond about four equity funds you are adding overlap and cost, not risk reduction. Most Indian retail portfolios hold twelve schemes that together are one large cap fund with a higher expense ratio.

    Then walk it

    1. The principle: risk falls when you add assets whose returns do not move together. Two large cap funds in the same market have a correlation near 0.95 and an enormous overlap of holdings, so the second one reduces almost nothing.
    2. Test it directly. Pull the top 20 holdings of the funds a client owns and compute the overlap. It is routine to find 60 to 70 percent common holdings across four supposedly different equity schemes, and showing a client that table is the most persuasive thing you can do.
    3. What actually diversifies an Indian portfolio: moving down the market cap curve, adding debt with a different driver, adding gold, and adding international equity, because domestic and global equity cycles genuinely differ.
    4. So the shape I would use: one core equity fund or index fund, one mid or small cap, one debt fund matched to the horizon, one liquid fund, plus optionally gold and an international sleeve. That is five or six line items and it covers everything.
    5. The costs of over-diversification are real and under-discussed: you dilute any manager skill you were paying for, you make rebalancing a multi-scheme tax event, and you make the portfolio impossible to monitor, so it never gets reviewed.
    6. One honest caveat: for a very large portfolio there is a case for splitting across AMCs to limit single-manager and single-house operational risk. That argument justifies maybe two managers per sleeve, not twelve.

    Where candidates lose it

    Equating number of funds with diversification. The answer that lands names portfolio overlap as the measurable test and points out that the second large cap fund adds cost, not diversification. Mentioning that rebalancing across many schemes is a taxable event in India shows you have advised real clients.

    Expect next

    • How would you measure overlap between two funds?
    • Does holding funds from different AMCs help?
    • Where does gold fit, and how much?

    Reported by candidates at Northern Trust (Asset Management, Chicago, 2025). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.