Portfolio Management Service: Outsource Your Investment Worries
Portfolio Management Service: Outsource Your Investment Worries
Aug 24, 2018 | 12:00 PM IST
Aug 24, 2018 | 12:00 PM IST
The stock advisory service is the best option for you if you want to invest in stock market but don't have adequate knowledge of it. An advisory firm gives you the much-needed hand holding to take the right decisions. Their research reports and periodical reviews of open calls not just give you the guiding light but also build your aptitude as an investor. You become more and more self-assured about the potential of equity. But stock advisory subscription doesn't give you full freedom. There is a lot the investor has to do once a "Buy" or "Sell" call is initiated by the advisory.
Limitations Of Stock Advisors/Stock Advisory Firms
The general procedure of a stock advisory is to initiate the buy call once the research is done. Here onwards, it is the responsibility of the investor to buy the recommended stock at the recommended price. In case the investor misses buying at the recommended price he will have to take a hit in the profit percentage as profit would be computed from the price recommended by the advisory. For example, if the ABC Advisory initiates a buy call on Tata Motors for the price range of 250-260 and holds it till the target of 300. It is expected that the investors would buy it in the recommended price range. If you are a subscriber and due to some reason you miss to buy the stock at the recommended price and later you buy it when it is at 280 and later exit at 300. In this scenario, you will enjoy far less profit than the one who bought it in time.
The majority of the investors who opt for advisory services are working professionals who have a day job. In the hustle-bustle of the day-to-day work, there is a possibility that they might miss many lucrative investment opportunities. Apart from this, there are various other challenges which will stand as hindrance between an advisory and the investor.
Such investors need an extremely personalised service. Portfolio Management Service (PMS) is one such service that takes the burden of buying & selling away from the investors. It's a personalisation on a different level altogether.
What Is The Meaning Of Portfolio Management Service (PMS)?
Portfolio Management Service is a process of investment analysis and portfolio management. Its an investment product usually availed by the investors who have high net-worth. It's more of an investment portfolio monitoring for those who can't do it for themselves. The reason this service is special is that it gives the subscriber a complete freedom from the hassles and complexities that are associated with equity investment. Namely, research and analysis of the stock, keeping track of all the business and political activities which can potentially have an impact on your investment. That's too much of work for a working professional.
In PMS, you virtually have to do nothing. Your entire portfolio is managed by investment professionals. These professionals have a thorough understanding of your investment goals and they draw the strategy accordingly. The portfolio manager does all the research of the stocks and takes decisions about the allocation of funds. He/she keeps track of all the activities and keeps the investors informed about developments in the portfolio. In terms of control over the portfolio, there are two types of PMS services - Discretionary PMS and Non-discretionary PMS.
Types Of Portfolio Management Services In India
Discretionary PMS - In this type, the full authority of buying, selling and strategising rests with the service provider. There is no obligation whatsoever on the service provider to consult the investor before taking any decision on his/her behalf. Most of the top PMS in India offer discretionary service.
Non-discretionary PMS - In this type, the investor has a say in all the portfolio activities. He/she can give suggestions and ideas to the manager. Though this method gives more liberties to the investors, it defies the purpose of PMS as the professional portfolio manager, despite knowledge and aptitude, has to consult the investor before taking crucial calls. Due to these complications, non-discretionary PMS is considered counterproductive.
How Does Portfolio Management Process?
The idea of the PMS is that you hand over your portfolio a person who is equipped with knowledge and skills to execute investment decision on your behalf. In keeping with that theory, the portfolio manager has the full control of the portfolio. However, you have access to your portfolio. You can log in to your demat account any time you want and get the real-time information of your holdings. The most important thing that you need to understand is that the demat and trading account is always in your (subscriber) name. Therefore, the account holder is the sole beneficiary of all the profits, losses, dividends, bonus shares and also liable to taxes that the account incurs.
The X-Factors Of Portfolio Management Service
Imagine you have a canvas, a variety of colours and the best brushes but you don't know how to draw. So you approach the artist and ask him to make a painting for you using your canvas and colours. As a result, you get a painting which is truly artistic, aesthetic and personifies the finesse and skills of the artist who made it.
Now imagine, instead of giving it to an artist had you done it yourself, it would have been an ugly blob of colours drawn with unruly strokes. A complete waste of time, colours and canvas. This is exactly what PMS is - you hand over your money and demat account to an investment "artist" to increase its value. This is one of the biggest qualities of PMS and there are many more worth mentioning.
Aggressive Growth Potential- It is a proven fact that equity is the best wealth builder. To gain from it many investors opt for equity mutual fund which is an indirect way of investing in stock market. But it's the direct equity investment which has the ability to give enormous profits in relatively shorter time than a mutual fund. PMS gives you an opportunity to invest in stocks under the supervision of experts who are equipped with tools to minimise the risk element. This stands as the biggest X-Factor of PMS as you get high profit at a lesser risk. Compared to mutual funds, the growth potential of a PMS portfolio is much higher.
"Let The Profits Run" Approach- The general retail investors' tendency in stock investment is quite peculiar. First, they buy stocks which are attractive in terms of price. Then when the stock turns profitable they immediately sell it. Similarly, if a certain stock is in the loss they will let it run with an expectation that someday it will turn green. This fallacy is common amongst all the investors who don't understand the dynamics of the stock investment. The root cause of this issue is that it's easy to know the price of the stock but quite difficult to understand its value. For example, if the stock of ABC is trading at Rs.10 we can say that the price is attractive. But does it have value? If this stock, on the basis of good fundamentals, can reach Rs.100 in next 2 years, we can say that the stock has a great value. However, if in next 2 years, it is going to go down to Rs.1, naturally there is no point in buying it. Through Fundamental Analysis, we can ascertain the value of a stock.
The portfolio manager is armed with a research team which conducts an in-depth analysis of all the stocks they are going to invest in. Due to this exercise, they have utter clarity of the value of the stock. This knowledge enables them to exploit the full potential of a stock. Thus, they don't commit the blunder of booking premature profits and let the profits run.
Conditions Of PMS
As mentioned earlier, PMS is an ideal investment tool for High Networth Individuals (HNI). The reason is the PMS service is regulated by the stern conditions of SEBI. One of the fundamental condition is that to subscribe to PMS the investor has to bring at least 25 lakhs capital or has to have holdings worth 25 lakh. Generally, only HNIs have such amount sitting idle in their accounts. Thus, instead of keeping the money in fixed return instruments like fixed deposits then opt for PMS which can give far better returns to their money.
Motilal Oswal, ShareKhan, SMC Global are some of the top portfolio management services providers in India.
If Not PMS Then What?
Owing to rigid conditions, only people who have the adequate capital will be able to enjoy this service. But what about those who need the same service. For such investors, Niveza has launched p360. This Personalised Research Service which gives investors freedom from keeping track of "Buy", "Sell" calls initiated by the advisory firms. In this service, all the investors need to do is bring Rs.2,00,000 capital, choose a plan that suits their requirements and then sit back and see their portfolio value soaring.
The Salient Features of p360
Professional Research Tailor-Made For Individuals - The biggest enemy of retail investors is their emotions. Yes, even the smartest of the investors succumb to their emotions. What it means is when a stock makes a profit they think the market might drop and this level may never come again and in the fit of emotions they end up selling a good stock. This and many more like this are the emotion-driven mistakes of the investors. This happens due to lack of research and understanding of the growth potential. With p360 you can dare to let your stocks run the full course as your decisions will not be backed by emotions but hard, in-depth research.
Unlimited Access to Research Desk- Nothing is more reassuring than talking to the person who is at the helm your portfolio. With p360, you get unlimited access to our research desk who will help you with all your investment-related queries and be available to explain the rationale behind their investment decisions.
Simple Flat Fee Structure- The complex profit sharing equations can become quite difficult to understand. The simple flat fee structure of p360 allows you to enjoy profits without worrying about the mess of numbers to separate actual profit from gross profit.
Dedicated Equity Dealer- Missing the buying opportunity and subsequently missing out on big profits is a thing of past as in p360 you get the services of dedicated equity dealer to enter and exit all the position that ensures you get what is promised to you - profit.
Performance Guarantee With Zero Brokerage- If you don't see profits in the period of subscription we renew your subscription for free. That's not all, for all your investments in p360 you pay zero brokerage. You heard it right - ZERO BROKERAGE!
Is PMS Better Than Mutual Fund?
It is natural for most of you to think if the PMS is so rewarding then why invest in equity mutual fund at all? That's a valid question. But we have to understand why one invests in mutual funds. The objective of equity mutual fund is to disregard the market cycles and keep on investing a certain amount on a regular basis. On the other hand, PMS is more time sensitive. Here the portfolio manager has to directly answer the clients and have to produce good returns regardless of how the markets are behaving. Therefore, if you have subscribed to PMS, you will not have the liberty of being carefree. You will have to take tough decisions but you will have experts to guide you through.
Let's understand the clear distinction between mutual fund and PMS.
|Portfolio Management Service||Equity Mutual Fund|
|Methodology||Skilled portfolio manager manage your portfolio which makes the process hassle-free for layman investors. These professionals are equipped with in-depth research and study of global and domestic market situation. Also, they continuously monitor your stocks which is impossible for retail investors to do.||The mutual funds are monitored by fund managers. Unlike PMS, in a mutual fund, all the money is pooled from various investors and goes in a single portfolio of the asset management company.|
|Good For Whom?||Gives exposure to direct equity investment. It's a product designed to prevent retails investors from making common stock investment errors. Retail investors tend to get swayed by the emotions and lack the skills to carry out research and analysis on their own. For such investors, PMS is the best service.||Gives you indirect exposure to equity. Thus, its best for those who dont have big capital ready and prefer to build their corpus brick by brick.|
|Charges/Fees||Fees/subscription of PMS are negotiable. There are some companies which have the standard charges while some prefer certain percent in profit. In any case, there is no entry or exit load in PMS. One can start and stop the service anytime he/she likes.||The fees for a mutual fund are adjusted from your corpus. All the Asset Management Companies (AMCs) have to adhere to the regulations set by SEBI. The entry load has been totally abolished but all the mutual funds come with a condition of exit load. Exit load has to be borne by the investors if they exit the scheme within a certain period (Mostly, 1 year) of entering the scheme.|
|Conditions||SEBI has laid out guidelines for PMS. The minimum investment required for subscribing a PMS product is Rs.25,00,000. There is no upper cap.||The investor needs to be KYC compliant. Apart from this there are no significant conditions.|
Niveza Editorial Desk :
We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to a pave a smooth road for our clients in the shaky world of stock market. While tracking the mood swings of the market we bring our clients the most rewarding deals.
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