Portfolio Management Service (PMS) – Things to Know about the Fund
Portfolio Management Service, or PMS, is a professional service in which certified and experienced portfolio managers, supported by a research team, manage stock portfolios on behalf of customers rather than the clients managing their own. India has one of the oldest stock market ecosystems globally, and the direct equity investment craze has been around for decades, with numerous iconic listings in the markets since the late 1970s. A substantial number of investors have equities portfolios in their Demat accounts that they manage based on their own experiences or with the help of brokers and equity consultants.
There are millions of Demat accounts; some of the largest publicly traded firms have as many as 2-3 million owners. While brokers provide equities research, advisory services, and an operational platform, investors are generally required to participate in investing discretion and operational elements. More crucially, both investors and service providers share the responsibility for outcomes. On the other hand, professionally managed portfolios hold the portfolio manager accountable to the investor. They are managed for a fee, and the investor has access to everything, including research, investing, and operations.
Benefits of Investing in Portfolio Management Services
PMS can be discretionary (where the fund manager makes choices on behalf of investors) or non-discretionary (where the fund manager must get an investor agreement for recommended investments). Mutual Funds are another option for professionally managed stocks investments, and they are also a popular choice. Take a look at some of the advantages of PMS:
- Premium Portfolio
People who manage their investments buy less quality and place a greater emphasis on price rather than value.
Individual investors (Non-Promoter Non-Institutional [NPNI]) have a lesser proportion of holding in the major indexes like Nifty, BSE 200, or even Nifty 500, even though there are thousands of listed firms. Non-index smaller firms have higher retail or NPNI holding. In their portfolios, there is a lean toward lower-quality equities. Nifty accounts for about 60% of the market capitalization, BSE 200 accounts for nearly 85% of the market capitalization, and Nifty 500 accounts for nearly 94 percent of the market capitalization.
- Transparent and Strong Holdings
PMS is transparent; therefore, if we use cricket terminology, investors can obtain a ball-by-ball report on their portfolio in PMS. Every trade is communicated to the investor, and the managers’ website offers a real-time portfolio view. The customer may examine a targeted portfolio of chosen equities in his holdings for Motilal Oswal PMS portfolios. Mutual funds often have large scattered portfolios ranging from 25, 30 to even 100 stocks (which limits transparency) and only make their holdings known once a month or quarter. And investors with 5/6/7 different funds in their portfolios wind up with around 250-300 equities in their portfolios. Even if they de-duplicate the holdings through thorough research, they will discover that they own just about everything there is to own in the market, resulting in dilution of returns. If you purchase the market, you can’t beat it.
- Customers are Focussed
PMS assists in focusing on mass and wealthy clientele. While mutual funds can employ SIPs and other methods to target new to the market and smaller groups, PMS is defined by its concentration on the mass wealthy and affluent. This segment of the Indian market is rapidly expanding, values flexibility, and, most significantly, is familiar with equity investment. The number of people who work on the investment in stocks is over three times that of those who invest in mutual funds. In any case, sweat equity has been a major source of wealth growth in the recent decade. Investing in PMS makes it simple to diversify your assets.
- Based on Online Top Up
Because our portfolios have relatively low churn, registering for a SIP with Motilal Oswal PMS is an intriguing process. When an investor registers for a PMS-SIP, he or she is more than likely aware of the handpicked targeted list of high-quality equities that will be purchased month after month. A paperless and user-friendly PMS-SIP may also be registered online. Similarly, Motilal Oswal PMS allows investors to add to their PMS portfolio on a same-day basis by purchasing extra amounts online. Ideal for the day when a worldwide issue unrelated to local markets causes the Sensex to drop by 1000 points, only to recover in a few days!
Types of Portfolio Management Services (PMS)
In its broadest sense, Portfolio management is the science of deciding how to invest your money. The idea encompasses techniques and policies for aligning investment choices to a person’s goals, risk tolerance, and asset allocation needs. All portfolio management techniques aim to strike a balance between risk and return. Portfolio management is focused on analyzing the strengths and weaknesses of your investment selection approach to optimize returns relative to your risk appetite, whether you’re investing in shares, bonds, or any other sort of asset.
Even though portfolio management solutions differ, they all fall into one of four categories:
- Active
- Passive
- Discretionary
- Non-discretionary
- Active Portfolio Management
Active portfolio management necessitates a high level of market knowledge. The approach is referred to as “active” because it necessitates a continuous review of the market to acquire assets when they are cheap and sell them when they are overvalued. The approach necessitates rigorous market analysis, broad diversification, and a solid grasp of the business cycle.
- Discretionary Portfolio Management
The fund manager has total control over their client’s investment decisions when using a discretionary portfolio management technique. The discretionary manager makes all of their customers’ buy and sell decisions and employs whichever approach they believe is optimal. Individuals with substantial investment knowledge and expertise can only offer this plan. Clients who utilize discretionary managers are comfortable entrusting their investment decisions to a professional.
- Passive Portfolio Management
Because its proponents believe in the efficient market theory, passive portfolio management isn’t concerned with ‘winning the market.’ Put another way; they think that fundamentals will always be reflected in the underlying asset’s value. Risk-averse investors generally prefer passive techniques. Investing in an index fund that tracks the S& P 500 or another market index is one of the simplest methods to apply a passive approach.
- Non-discretionary Portfolio Management
A financial adviser, in essence, is a non-discretionary portfolio manager. They will explain the advantages and disadvantages of investing in a certain market or strategy, but without your approval, they will not carry it out. The main distinction between a non-discretionary and a discretionary strategy is this.
Summing Up
We hope the points mentioned above about Portfolio Management Services (PMS) will help you know and invest in the fund of PMS with proper planning. Know the details and follow the steps whenever required.
