Fund Selection Policy
Fund & Product Selection Policy
1. Our 4-Step Product Selection Process
Investor Profiling
Comprehensive risk profiling analyzing financial capacity, goal timelines, net cash flow, and psychological loss tolerance.
Category Mapping
Aligning the investor's profile to SEBI-defined asset classes and Riskometer tiers to determine optimal asset allocation.
Scheme Evaluation
Multi-factor screening across 8 quantitative and qualitative criteria (rolling returns, Sharpe, expense ratio, AMC stability).
Fulfillment & Review
Presenting shortlisted options with SID/KIM. Final investment choice is always the investor's. Annual review mandated.
2. Multi-Dimensional Investor Risk Profiling
Before proposing any financial scheme, FINWISDOM conducts an in-depth risk evaluation across 8 crucial financial dimensions:
Age & Life Stage
Investment horizons, dependent obligations, and risk capacity naturally shift across career and retirement phases.
Income & Surplus
Net monthly disposable cash surplus after mandatory lifestyle expenses, debt obligations, and emergency fund buffers.
Existing Debt / EMIs
Fixed liabilities (home loans, education loans, personal debts) affecting liquidity and financial stress thresholds.
Financial Goal Horizon
Short-term (<3 yrs), medium-term (3–7 yrs), and long-term (7+ yrs) objectives with targeted maturity dates.
Risk Tolerance
Psychological comfort and balance sheet capacity to endure short-to-medium term market volatility and drawdowns.
Market Experience
Investor familiarity with market cycles, past asset exposure, and product sophistication (first-time vs experienced).
Tax Bracket
Evaluating marginal tax slabs to optimize post-tax returns through Section 80C ELSS or debt/equity taxation rules.
Liquidity & Emergency Needs
Ensuring 6–12 months of contingency liquid reserves before committing capital to long-term lock-in products.
3. Risk Categories & Product Suitability Matrix
| Risk Profile | Suitable Fund Categories | Recommended Products | Categories to Avoid | Recommended Horizon |
|---|---|---|---|---|
|
🟢 Conservative
Capital preservation priority
|
Liquid, Overnight, Ultra Short Duration, Money Market, Short Duration Debt, Conservative Hybrid | Debt Mutual Funds, Liquid Funds, Term Insurance | Small Cap, Sectoral/Thematic, PMS, Credit Risk | < 3 Years |
|
🟡 Moderate
Balanced growth & income
|
Balanced Advantage (BAF), Aggressive Hybrid, Large Cap, Multi Cap, Nifty 50 Index Funds | Hybrid Mutual Funds, Large Cap MFs, Index Funds, Health Insurance | Small Cap (Primary), Thematic/Sector Funds, Long Duration Debt | 3 – 7 Years |
|
🔴 Aggressive
Long-term wealth compounding
|
Flexi Cap, Mid Cap, Small Cap, ELSS (Tax Saving), Thematic, International Funds | Diversified Equity MFs, ELSS, SIF (Min ₹10L), PMS (Min ₹50L), AIF (Min ₹1Cr) | Overnight/Liquid for long-term compounding, capital protection plans | 7+ Years |
4. 8-Point Scheme Evaluation Framework
Rolling Returns Track Record
Consistent 3, 5, and 7-year rolling returns against benchmark indices across bull, bear, and consolidation market phases.
Fund Manager Competence
Managerial tenure, investment philosophy adherence, and historical track record across market downturns.
AMC Stability & Governance
Institutional pedigree, total AUM size, risk management systems, fiduciary culture, and regulatory compliance record.
Total Expense Ratio (TER)
Competitive management expense relative to peers. A lower TER directly enhances the investor's compounded net yield.
Risk-Adjusted Ratios
Sharpe Ratio, Sortino Ratio, Standard Deviation, and Downside Capture ratios to measure returns generated per unit of risk.
Liquidity & Portfolio Quality
Underlying asset liquidity, low stock/sector concentration, top 10 holding ratios, and credit quality (AAA/Sovereign for debt).
Optimal Fund Size (AUM)
Balanced fund scale ensuring sufficient liquidity while preventing scale-drag in mid-cap and small-cap segments.
Mandate & Style Discipline
Strict adherence to scheme mandate without style drift (e.g. large-cap funds making unmandated mid/small-cap allocations).
5. Conflict of Interest Management Policy
- Distributor trail commission rates received from AMCs have ZERO influence on scheme recommendations
- We maintain no "preferred AMC" lists based on commercial payouts or sponsorship arrangements
- We strictly reject all sponsored trips, luxury gifts, or contest incentives from fund houses
- Portfolio churning (unwarranted switching to generate commissions) is strictly prohibited
- Investors are always informed about Direct Plans as an alternative, though we distribute Regular Plans
Practices We Strictly Prohibit
- Recommending schemes solely driven by distributor commission rates or incentives
- Portfolio churning — unnecessary switching of investments to generate fresh trail or transaction fees
- Accepting non-cash benefits, sponsored foreign travel, or gifts from Asset Management Companies
- Recommending complex, high-risk closed-ended NFOs without exhaustive risk profiling
- Recommending products outside the investor's risk profile without an executed Unsuitability Declaration
6. Unsuitability Declaration Process
When an investor explicitly requests a product that does not align with their assessed risk profile, FINWISDOM enforces the following statutory 5-step protocol:
Written Risk Mismatch Advisory
We provide formal written communication explaining why the chosen scheme deviates from the assessed risk profile.
Detailed Downside & Volatility Disclosure
Thorough documentation of potential capital drawdowns, liquidity lock-ins, and downside volatility risks.
Formal Unsuitability Declaration
The investor must execute a signed Unsuitability Declaration acknowledging full awareness of the product risk mismatch.
Execution on Investor's Sole Mandate
Transaction is processed only after the declaration is fully signed and archived in the compliance register.
8-Year Mandatory Record Preservation
All unsuitability records and client acknowledgments are retained securely for a statutory minimum of 8 years.
7. Product-Specific Selection & Advisory Guidelines
Insurance Products
- Human Life Value (HLV) calculation conducted before recommending life cover
- Pure term insurance is prioritized for life risk protection
- Health cover limits evaluated against medical inflation and family history
- Corporate agency distribution only — risk is underwritten by the respective insurer
Specialised Investment Funds (SIF)
- Offered exclusively to sophisticated investors with minimum ₹10 Lakhs surplus
- Positioned between Mutual Funds and PMS for specialized thematic strategies
- Strategy complexity and track record limitations disclosed in detail
- Allocation capped as a tactical satellite component of overall wealth
Portfolio Management Services (PMS)
- Statutory minimum ticket size of ₹50 Lakhs per SEBI regulations
- Suitable solely for Aggressive risk profiles with 5+ year horizons
- Comprehensive evaluation of manager track record and performance fee hurdles
- Concentration and illiquidity risks explicitly documented
Alternative Investment Funds (AIF)
- Statutory minimum ticket size of ₹1 Crore for accredited investors
- Category I, II, III lock-in rules, drawdown structures, and tax pass-through explained
- Capital call commitments and illiquidity strictly evaluated
- Suitable strictly as a private equity / venture diversification tool
Formal Declaration — Product Selection Policy
ARN-367223I, Devansh S Mehta (Director), on behalf of FINWISDOM FINANCIAL SERVICES PVT LTD (ARN-367223), hereby formally declare that this Fund & Product Selection Policy represents our unconditional commitment to objective, suitability-first advisory. Any breach of this policy may be reported directly to AMFI at igrc@amfiindia.com or SEBI SCORES at scores.sebi.gov.in ↗.
Devansh S Mehta
Director
FINWISDOM FINANCIAL SERVICES PVT LTD
AMFI ARN-367223 | CIN: U66190MH2026PTC472887
Registered Office
1203 Ajmera Sikhova Off LBS MARG, Lane Opp. Damodar Park, Ghatkopar West, Mumbai
400086
Phone: 9920217997 | Email: devansh@finwisdom.co.in