Direct equity investors are often seen disappointed with the performance of their portfolios, as human emotions of greed and fear makes them commit errors. Also, all equity investments require regular monitoring for cleaning up holdings that become junk with time, hence it is a time-consuming activity. All these reasons and more, make ‘Portfolio Management Services’ more suitable for the HNIs.
What is Portfolio Management
It is a customised solution to investments in equity and debt offered by experienced and professional Fund Managers. However the ownership of stocks continues in one’s own Demat account. The benefit of this service is that you may choose to give discretionary powers to Portfolio Managers for, staggered deployment of money to average out entry levels and portfolio actions into research backed stock ideas into mid/large/small cap to enhance return potential.
Portfolio Management Services (PMS) as an equity investment solution has been a popular choice amongst High Networth Individuals (HNIs) ever since the Market watchdog, SEBI, has tightened regulations. In 2010, the regulator mandated ‘High watermark principle’ to be used as the basis of sharing profits from the portfolio returns as management fee. This implies that the investor is charged fee only in case there is real addition to the capital introduced by him. This is a unique characteristic which offers a low cost opportunity for optimisation of returns generated by competent portfolio managers with robust track records.
Moreover factors such as transparency of charges, better access to information, high chances of spotting opportunities at early stages of investment, makes PMS a must-have in every HNI’s portfolio for comfortable journey to taking advantage of India Growth story.