Portfolio Management Service is a tailor-made professional service used by high net worth investors to invest in stocks. Dileep K, Portfolio Manager of Geojit Financial Services Ltd, explains key features of PMS and how it differ from Mutual Funds.
Portfolio Management Service (PMS) and Mutual Funds are the two main investment avenues through which investors can invest indirectly into the capital markets. PMS is a tailor-made professional service used by high net worth investors to invest in stocks. The minimum amount to required to invest in a PMS is Rs. 25 lakh. There are products that invest in fixed income as well as in derivative instruments. But mostly investors invest in stocks. There are broadly three types of PMS- Discretionary, Non-Discretionary and Advisory. The major one is discretionary PMS where the portfolio manager takes investment decisions and executes on behalf of the investor. In non-discretionary, the portfolio manager suggests investment ideas, while the decision is taken by the client and execution is done by the portfolio manager. In advisory PMS, the portfolio manager suggests investment ideas, but both decision and execution are done by the investor.
NRIs, Organisations and Trusts can also invest in PMS. NRIs can invest in PMS either through repatriation mode or by using one of their sources in India. Even though both MF and PMS are handled by fund managers, portfolio managers have more flexibility in managing funds. In tax aspect, there is notable difference between MFs and PMS. In mutual funds, long and short-term gains are computed as per the investor's date of investment and redemption. Whereas, in PMS, tax is computed based on individual stock transactions. A PMS client will also get daily reports on their portfolio summary.
To take the stress out of investing, investors can choose from one of Geojit’s two pre-defined portfolios, each matched to a specific risk profile and clear set of aims - Advantage Portfolio, positioned to invest predominantly in equities of mid and small cap companies and Freedom Portfolio, positioned to invest across a wide gamut of fundamentally strong business in the large cap, mid cap and small cap stocks. Even during the market volatility in past 6 months, Geojit’s sound investment plan has helped investors to ride out the peaks and valleys of the market and gain superior returns.
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