Portfolio Management Services


James is a high net-worth individual, looking for investing in the stock market. He wants personalized investment solutions which will help him create more wealth over the long-term. But due to his busy schedule, he keeps postponing his investment plans. His friend, an avid investor advised him to avail the services of a portfolio manager. Here is a conversation between James and Mathew, a portfolio manager.

James: What is portfolio management service?

Mathew: Many investors like you want to have a direct equity portfolio, but do not have all the expertise needed to manage the stock portfolio. Portfolio Management Services or PMS can be a good for such investors. PMS is a professionally managed and offers customized service for high net worth clients. It offers benefits of flexibility, risk diversification and liquidity.

James: How does PMS work?

Mathew: PMS is offered by brokerages and mutual funds registered with SEBI. The investor and the portfolio manager enter into an agreement detailing the investment strategy, goals and other details.

The investor can choose from three types of PMS:      Discretionary, Non-Discretionary and Advisory.
In discretionary, the portfolio manager takes investment decisions and executions on behalf of the investor. In non-discretionary, the portfolio manager suggests investment ideas, while the decision is taken by the client and execution is done by the portfolio manager. Advisory Portfolios, where the portfolio manager gives only advice to the investor. The investment decision and execution will be done by the investor.

James: What are the benefits of PMS?

Mathew: If you are too busy to give your investments the attention it needs or if you are inexperienced, having a professional run your portfolio may be a good solution. This is because your money gets invested in a concentrated portfolio, according to your risk appetite and personal investment goals. When you opt for a PMS, a bank account, Demat account, and trading account are separately opened in your name and all investments are made in your name. Any income or dividend coming from the investment is also be credited in your bank account and the shares will be held in the Demat account in your name.

James: Is there a minimum investment amount for PMS?

Mathew: As PMS is a service for HNI investors, the minimum investment required is Rs. 50 lakhs, as revised by SEBI recently.

James: How do I monitor my investments?

Mathew: Market regulator SEBI has made it mandatory for portfolio manager to provide investors with regular performance reports. And today most portfolio managers provided clients with online access. The transaction details and performance summary can be viewed by 24X7.

James: What are the tax liabilities in PMS investment?

Mathew: These investments are taxed on the basis of transactions done in individual stocks. STCG of 15% applicable if the profit is realised within a period of 1 year in an individual stock.  If there is any gain after holding 365 days then 10% LTCG is applicable over and above Rs. 1 Lakh.

James: Are there any risks associated with PMS investments?

Mathew: Yes. PMS investments are subject to risk based on the asset class the money gets invested in.


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