Portfolio Management Vs Portfolio Management Services

What is Portfolio Management?

Portfolio Management is the allocation of funds to different asset classes. Portfolio management services are for managing investors portfolio. 

Factors that can determine an investor's investment goal:

The risk appetite of an individual is a key factor in investment decision making. Risk can vary from one person to another, from one place to the next and from situation to situation. It is therefore not universally applicable and is usually specific to one person.

There are however factors that can help an individual determine their investment goal, such as:

• Requirement
• The risk appetite is related to risk tolerance
• Future and current earnings
• Future and current expenditures
• Time horizon for investment

Portfolio Management Services (PMS) in India:

Portfolio management services are professional money managers who manage investor's portfolios in stocks, debt and fixed income products. Individual securities are acquired by one who invests in PMS. He/she can tailor their portfolio to suit personal preferences and goals.

The guidelines of SEBI state that only PMS-related entities can offer PMS to clients who are registered with SEBI. A PMS account requires a minimum investment of Rs. 25 lakhs.

Two categories can be broadly defined as PMS. These are:

• 1. Discretionary PMS- This service allows the fund manager to invest at his discretion and the client can not interfere with the investment process.
• 2. Non-Discretionary PMS - The portfolio manager will only suggest investment ideas under this service. The investor has the final say in the investment timings and the choice of investment ideas. The portfolio manager executes the trade.

  Investment strategies in Portfolio Management Services (PMS).

  Two ways an investor can invest into PMS are available:

  • By Cheque
  • Transfer existing shares to the PMS account. The customer must also provide few documents such as a PMS agreement form, PoA Agreement, new demat (even if an investor already has one), and copies of documents such as PAN, address proof, and identity proof. The PMS scheme also allows for client interactions between the fund manager and client. The amount of portfolio investment will determine the frequency. Frequency of interactions increases with a larger portfolio.

PMS Fees: APMS charges are based on fees that vary from service provider to service provider.

Entry Load:The entry load for PMS can be as high as 3%. This charge is made at the time you purchase the PMS.

Management Fees: Each PMS scheme may charge a fund management fee, which can vary between 1% and 3%.

Profit Sharing: There are some PMS schemes that offer profit sharing. This means that the service provider takes a percentage of the return and charges the customer a certain amount.