InvestorQ : Can you explain how the PMS scheme is better than directly investing in equities and what are the key advantages of this method?
Arti Chavan made post

Can you explain how the PMS scheme is better than directly investing in equities and what are the key advantages of this method?

Aditi Sharma answered.
2 years ago

Reputed PMS companies are backed up by combined man-years of in-depth research insights, market intelligence and trading expertise. Sectoral specialists and chartists combine to give the investor the benefit of short term and long term ideas to better their investment performance. Research and expertise can go a long way in reducing your risk when investing in equities. Typically, executives like Vijay may have neither the time nor the resources to track so many stocks and manage the risk of their portfolio. This is something the PMS can handle quite easily. The track record of any PMS outfit can be easily checked before taking a decision on the same. Now your question would be that you can get most of these merits in a mutual fund. Then what is the big advantage in opting for a PMS. Can we make do with a mutual fund scheme itself, if diversification and professional management is the major concern?

Now we come to the difference and the big difference is customization. A mutual fund adopts a broad view on the market and then decides on investing strategies accordingly. It is a mass market and hence it is not possible for the mutual fund to have individual products that are suited to the unique requirements of each investor. That is where PMS gives an HNI investor an advantage. For example, Vijay may have specific requirements with respect to finances. He may be young and therefore willing to take more risk on his portfolio. Alternatively, he may require a strategy that makes liquidity available to him at the end of 3 years. He may even want a short term strategy that takes advantages of the twists and turns of the market without taking undue risk. All these needs can be articulated to the PMS and specific products can be tailored. This customization is the big advantage of a PMS. The beauty of the PMS is that it can tailor the fund for you. While the broad theme and the strategy remains constant, the actual granular stock picking can be fine tuned to your specific requirements.

PMS uses a mix of research, insights and intelligence to improve portfolio performance. It is customized, so it can be closer to your unique requirements. It is transparent and simple so investors get access to all required information. You get access to a host of other ancillary services apart from portfolio management. As mentioned earlier, PMS is a more focused and customised version of a mutual fund. It surely has its merits and those who meet the minimum corpus requirements can surely take advantage of that.