Portfolio Management Services is a customized investment product that invests in equities, fixed income and other securities. Most of the PMS in India invest in equities. Unlike in Mutual Fund in a PMS the investor holds the ownership of securities. As per SEBI regulations minimum investment in a PMS is now Rs. 50 lakhs which was earlier Rs. 25 lakhs. However a PMS may offer the investor an option to invest in equities in a staggered way. The way it works is that Rs. 50 lakhs are invested in a PMS scheme which in turn invests in liquid fund and from liquid funds money are invested in stocks in a staggered way which can be monthly.
There are 3 types of PMS in India
1. Discretionary
Under this method, the PMS is in total control and the choice as well as the timings of the investment decisions rest solely with the Portfolio Manager.
2. Non-Discretionary
Under this method, the PMS only suggests the investment ideas. The choice as well as the timing of the investment decisions rests solely with the Investor. Once the investor gives his consent for the trade the execution of trade is done by the portfolio manager.
3. Suggestions
Under this method, the portfolio manager only suggests the investment ideas. The choice as well as the execution of the investment decision rests solely with the Investor.
A PMS is suitable for an investor who desires to create long term wealth and requires personalised services. In terms of taxation, PMS attracts capital gains taxation similar to direct stock investing.
There are many SEBI registered PMS in India. They have different investment styles and we advice investors which PMS is suitable for them based on their risk appetite.
