1. Portfolio Management Services (PMS) are considered among the high-risk investments like foreign stocks, forex trading, penny stocks, F&O stocks, commodities and alternative investments like art, stamps, coins, etc.
2. PMS provide exposure to stocks, debt, derivatives like cash futures, cash-to-cash, index arbitrage, etc. as well as commodities to suit investors with large sums looking for a high level of customization to earn above-average returns from their investments.
3. However, this comes at a higher ticket size as an entry barrier (typically Rs.25 lakh minimum at any point of time), as well as higher cost because there is no capping of fees charged by PMS (although fee structure exists) .
4. Most PMS available in India are discretionary schemes where the assigned portfolio manager gets a free hand to take decisions with no say of the investor.
5. This arrangement makes it riskier than a mutual fund where the fund manager has assigned mandates and a history of scheme performance known to investors.
6. Liquidity is another issue as it can take up to a month to wind up a PMS and get your principal money back, whereas in an open-ended mutual fund, the money is in your account in just 2-3 working days (except ELSS funds with lock-in period of 3 years).
7. Taxation is even trickier as the portfolio manager trades on your behalf virtually daily making the resulting profits carried through PMS scheme taxable as business income.
8. On the other hand, your intention might have been to merely achieve a reasonable above-average return through capital gains, but the taxman may still not be on your side with his own set of interpretations.
9. At the end of the day, how you make your investing intentions known to the PMS and the taxman is purely an individual matter to sort out.
10. Considering above aspects, PMS cannot be compared or invested like mutual funds.
2. PMS provide exposure to stocks, debt, derivatives like cash futures, cash-to-cash, index arbitrage, etc. as well as commodities to suit investors with large sums looking for a high level of customization to earn above-average returns from their investments.
3. However, this comes at a higher ticket size as an entry barrier (typically Rs.25 lakh minimum at any point of time), as well as higher cost because there is no capping of fees charged by PMS (although fee structure exists) .
4. Most PMS available in India are discretionary schemes where the assigned portfolio manager gets a free hand to take decisions with no say of the investor.
5. This arrangement makes it riskier than a mutual fund where the fund manager has assigned mandates and a history of scheme performance known to investors.
6. Liquidity is another issue as it can take up to a month to wind up a PMS and get your principal money back, whereas in an open-ended mutual fund, the money is in your account in just 2-3 working days (except ELSS funds with lock-in period of 3 years).
7. Taxation is even trickier as the portfolio manager trades on your behalf virtually daily making the resulting profits carried through PMS scheme taxable as business income.
8. On the other hand, your intention might have been to merely achieve a reasonable above-average return through capital gains, but the taxman may still not be on your side with his own set of interpretations.
9. At the end of the day, how you make your investing intentions known to the PMS and the taxman is purely an individual matter to sort out.
10. Considering above aspects, PMS cannot be compared or invested like mutual funds.