Understanding: Portfolio Management Services
Portfolio Management Service is an equity instrument wherein skilled portfolio managers and stock market professionals make sound portfolio decisions that are supported by extensive research and factual data. Additionally, it better prepares you to deal with market adversity. The portfolios are actively managed by professional debt and equity portfolio management teams who tailor the financial portfolio management service following investment objectives. Investment portfolio management experts manage portfolios by investors' return expectations and preferences. When private individuals and institutional investors invest through investment portfolio management services, they legally own units of the funds.
Types Of Portfolio Management Services
Discretionary
Non-discretionary
Advisory
Under Discretionary portfolio management services, the asset purchase and sell decisions are made by a portfolio management professional on behalf of the client. The discretionary portfolio management services are ideal for clients that are not willing to manage their investment portfolios actively and have the utmost trust in the investment manager’s capabilities. The ultimate investment decisions are made and executed at the portfolio management professional’s discretion.
Benefits Of Investing In A PMS
Portfolio With Benefit Of Discretion
Portfolio management services can be discretionary or non-discretionary. Investors can opt for discretionary PMS and give the fund manager free hand to execute transactions on behalf of the client based on their best judgment. Alternatively, if you opt for a non-discretionary PMS, all transactions have to be approved by you (the client). Based on your unique needs and risk appetite, PMS creates a unique portfolio for you. This is not the case with a mutual fund that creates a single macro portfolio.
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FAQ’s
The following categories of investors can invest in a PMS, subject to PMS minimum investment capacity and willingness. Here is the list.
- Individual investors subject to completing KYC
- A Hindu Undivided Families (HUF)
- Partnership Firms
- Sole Proprietorships
- Association of Persons or AOP
- Private and Public Limited Companies
- Non-resident Indians, except certain geographies
- Overseas corporate bodies, trusts, societies; subject to RBI approval.
Yes. For investment in listed securities, an investor is required to open a demat account in his/her own name.
Both PMS and Mutual Funds are types of managed Funds. The difference to the investor in a Portfolio Management Services over a Mutual Fund is:
- Customised portfolio, tailored to suit the needs of investors.
- Concentrated Portfolio, lesser number of underlying stocks than Mutual Funds.
- Investors directly own the stocks, rather than the fund owning the stocks like in Mutual Fund.
- Difference in taxation
Each Portfolio Management Services account is in the name of an additional investor and so the tax treatment is done on an individual investor level. Profit on the same can be considered as business income (i.e., as per income tax slabs) or as a Capital gain (STCG at 15% or LTCG 10%). It depends on the client’s tax assessing officer/consultant as to how he treats this Income.