PMS or Mutual Funds: Which investment vehicle best suits your financial needs? You should choose between PMS and mutual funds, keeping in mind your distinct financial requirements
Gaurav Sharma has been a successful marketing consultant. Recently, he received a Rs.15 lakh bonus and plans to invest it in equities. His relationship manager suggests a portfolio management service (PMS), where a fund manager offers customised management. Sharma has previously invested in mutual funds, but is new to PMS. Which option will work better for him?#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} The only similarity between a portfolio management service and mutual funds is that both are managed by professional fund managers. However, PMS offers greater flexibility and customisation than mutual funds. With such a service, Sharma would enter into a separate agreement with the portfolio manager, allowing for highly tailored terms and conditions based on his investment preferences.
Sharma would have the choice between a discretionary or non-discretionary agreement, depending on whether he wants control over his portfolio decisions. Additionally, PMS offers a personalised service and detailed reporting, which will allow him to track daily portfolio developments. Designed for high net-worth individuals, PMS has a higher investment threshold, which may have influenced his relationship manager’s recommendation. However, this alone is not a strong enough reason to opt for PMS.
Sharma must consider that the personalised service comes at a higher cost and expense ratio than mutual funds. Additionally, PMS is not as strictly regulated by the market regulator, Sebi, making it a riskier option.
PMS is best suited for high net-worth individuals, who have a larger investment capital, prefer customised portfolios, are comfortable with additional paperwork, and are willing to pay a premium for the service. For smaller one-time lump-sum investments, mutual funds may be a better option, offering a diverse range of products tailored to different risk and return profiles.
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Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
