alleryStart learning →An Index Fund or Exchange Traded Fund tracking a specified index must invest at least
A65 percent in the index constituents
B80 percent in the index constituents
C95 percent in the index constituents
D100 percent in the index constituents
Answer & Solution
Correct answer: C. 95 percent in the index constituents
1. Index Funds and ETFs are SEBI Other Schemes tracking a specified index.
2. Minimum investment in the specified index constituents must be 95 percent of total assets.
3. The residual 5 percent lets the fund manage cash, receivables and rebalancing.
4. This threshold ensures the tracked scheme faithfully replicates the index.
_Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.2.4E(1)_
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