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Investors often find themselves at a crossroads when deciding between Portfolio Management Services (PMS) and Mutual Funds. Both investment avenues come with their own set of benefits and considerations.
Basis |
Portfolio Management Service |
Mutual Fund |
|---|---|---|
|
Transparency |
PMS investors have real-time visibility into every purchase and sale of shares, along with detailed information about the portfolio manager's fees. |
Mutual Fund investors typically receive monthly reports on final holdings and quarterly information on the total expense ratio, providing a less immediate view of their investments. |
|
Flexibility |
PMS allows portfolio managers to make timely decisions regarding the allocation and withdrawal of funds. |
In Mutual Funds, simultaneous redemptions by many investors may force fund managers to sell liquid stocks, potentially impacting the portfolios of those who choose to stay invested. |
|
Taxation |
PMS investors hold stocks directly in their names, each sale incurs a capital gain or loss, which can affect the overall tax liability. |
Benefiting from a pass-through status, allows the fund managers to buy and sell stocks without incurring taxes at the fund level. |
|
Investor Access |
With fewer retail PMS investors, they can expect more personalized attention. |
With larger retail mutual fund investors, direct attention will be limited. |
|
Fees Structure |
Offers a variety of fee models. |
Adhere to standard fee structures. |
The choice between Portfolio Management Services and Mutual Funds is a decision that should be made with a clear understanding of the key differentiators. Portfolio Management Service provides transparency, flexibility, direct access to fund managers, and diverse fee structures. On the other hand, Mutual Funds offer the benefits of pass-through status for taxation and the potential for diversification through pooled funds. Ultimately, investors must weigh these factors against their requirements and preferences to make a well-informed decision that aligns with their financial goals.
SEBI has notified the minimum amount to be ₹50 lakhs. This amount was increased from ₹25 lakhs to safeguard the small investors.
Portfolio managers cannot impose a lock-in period on investors. However, fund managers can charge an exit fee for an early exit.
Discretionary PMS are exclusively managed by the portfolio manager of the PMS. This means that the portfolio manager can execute the changes he/she believes are required and make them without the consent of the investor.
The money invested in PMS can be withdrawn as and when required. Upon a withdrawal request, money should be credited to the investor's account within 10 working days.
Yes, according to SEBI Regulations, portfolio managers are permitted to invest in derivatives, including transactions for hedging and portfolio rebalancing, through a recognized stock exchange.
