What Is Portfolio Management Service(PMS): Meaning, Types, Charges

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Portfolio Management Service is the most popular service among investors. Most of the brokerage firms and investment advisories offer this service with slight variations. Portfolio management service(PMS) is a 360-degree service for any investor. The service helps investor at each stage of investing and also ensures the profitability. The below article deals with the basics of the portfolio management services. It explains the meaning, process, benefits, disadvantages, and charges of the service in depth. However if you want to explore the best available PMS in India then read Best PMS Services In India.

What Is The Meaning Portfolio Management Service (PMS)?

Before jumping directly to the meaning of the portfolio management services you need to understand what is portfolio management?. Portfolio Management is nothing but managing your portfolio investment tactfully, by selecting the best mix of investment options in the right proportion and continuously shifting them in the portfolio. That is portfolio management is just like cooking the best recipe for your appetite to increase the return on investment and maximize the wealth.

Portfolio Management Service is a process of investment analysis and portfolio management. It's 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 the above explanation, you can understand the meaning and importance of the portfolio management and portfolio management services. But being an investor, you should also understand the process of the portfolio management. After reading the above stuff you may have stricken up with the question that what these professionals actually do with our money? What's the way that they manage our PMS investment. So let's just break down the process of portfolio management for you.

The process of Portfolio Management

The idea of the PMS is that you hand over your portfolio to 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.

A best portfolio management service helps you in each level of the investment since from constructing your portfolio to evaluate it periodically. Let's check the process in a detailed manner one by one.

Security Analysis

It is the very first stage of portfolio creation process, which involves examining the risk factors, as well as the expected returns of individual securities and its matchability with the investors risk appetite and financial goals.

Portfolio Analysis

After identifying the potential stocks and the respective risk involved, a number of portfolios can be created out of them, which are known as feasible portfolios.

Portfolio Selection

Out of all these feasible portfolios, the optimal portfolio, which is best suited for the investors according to his needs and goals, is selected.

Portfolio Revision

Once the portfolio is selected, the portfolio manager and the team of research analysts, keep a close eye on the portfolio, to make sure that no opportunity is missed of earning best returns for the investor.

Portfolio Evaluation

Here in this stage, the performance of the portfolio is assessed periodically to evaluate the quantitative measurement of the return obtained against the risk involved in the portfolio, for the whole term of the PMS investment. In this phase, if there is a requirement of changes in the portfolio to achieve the specific return expectation the asset allocation is also drifted which in turn helps to achieve the goal within a stipulated period of time.

Types Of Portfolio Management Services In India

Discretionary PMS

In this type, the full authority of buying, selling and strategizing 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.

Objectives Of The Portfolio Management Service

While designing the portfolio as per your need the service provider even keeps in mind the objectives to provide you with the best possible returns.

Capital Growth

It is the key objective of the portfolio management service. The stock portfolio manager always looks to provide a good growth in terms of returns for your PMS investment.

Security of Principal Amount Invested

The portfolio manager always ensures that the principal amount invested initially should always be maintained. That is the value of the investment should not turn lower than the initial amount invested.

Portfolio Diversification

It is one of the most important objectives of the portfolio management service. Providing the proper diversification as per the requirement of the investors is one of the most important aspects for any portfolio manager.

Consistent Returns

Consistent Returns are also important for any portfolio management service. The consistent performance is the only key to benefit the client as well as satisfy his financial goals within a specific time.

PMS Charges

The biggest hurdles of opting for portfolio management services are its fees and charges. The fees charged by PMS comprises three components. The upfront fee, management fee, and performance fee. Some of the PMS offer fixed fee also. Lets just understand what all are the charges you incur when you opt for the PMS.

Entry Load

Many advisors offering PMS services have an entry load of around 2% to 3 % which is charged at the time of buying the PMS only. This is the initial charge by PMS.

Management Charges

Every Portfolio Management Services scheme charges management charges. These are the fund management charges which vary from 1% to 3%. These charges are charged on a quarterly basis to the PMS account by the service provider.

Profit Sharing/Performance Fee

Some PMS schemes have profit sharing arrangements. This is one of the commonly used and charged fees, here the PMS provider charges a certain fixed flat fee and asks for the certain amount of the fees or percentage of profit over the stipulated returns generated against the benchmark.

Fixed Fee

It is the flat fee which is charged by the PMS provider to the investors on a monthly, quarterly or yearly basis. This is not a percentage based fee. This fee is decided before availing the PMS by the investors. There are some PMS provider who decide this fee on the basis of the portfolio to be managed or assets or corpus to be handled.

Exit Load

It is a fee which is charged by the PMS provider if you redeem the investments before the minimum investment period defined while availing the service.
Apart from the fees above, you may also incur brokerage charges each time a security is bought or sold.

With all the above discussion we can summarise the basic conditions of PMS. 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 5 lakh- 25 lakhs capital or has to have holdings. 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 at the top of the list of portfolio management services providers in India.

The brokerage and fees structure is altogether different and quite costly. So before going to the decision making level, one needs to check his own eligibility for PMS. But what about those investors who are dreaming for the same kind of service but are short of funds? For such investors, Niveza Indias flagship product - p360 (Personalised Research Service) is made for everyone, from beginner to HNI's. 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 soar

Features of the potential alternative of PMS - p360

Tailor-Made professional research 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!

PMS vs Mutual Funds

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 in a disciplined manner. 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. For making money out of markets you always need risk appetite and understanding of the market. So lets understand how these close competitors PMS and Mutual Funds are different from each other.

Investment Customization

PMS services offer you the customized investment opportunities. In the case of PMS, investors have been offered with many choices of selecting specific sectors, capitalizations to focus on your portfolio. Mutual funds dont offer such an option.
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. Whereas 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.

Investment Conditions

SEBI has laid out guidelines for PMS. The minimum investment required for subscribing a PMS product is Rs.5,00,000 however many of the brokers put entry barrier of capital Rs.25,00,000. There is no upper cap. Whereas in the case of mutual funds the investor needs to be KYC compliant. Apart from this, there are no significant conditions for investment.


PMS offers utmost transparency in investment management. Being an investor you will be aware of the all the transactions like a sale, purchase, and brokerage everything. You have all the hold on your investments and you will be aware of the situations where your portfolio manager made you profits and where made losses for you and how did he handle the volatility situation. Whereas in the case of a mutual fund investor receives all the details of the transactions by the end of the month.

Separate Status

In the portfolio management services every portfolio is considered separately and allocate a separate importance to it. That is every investor is treated separately owing to which your portfolio is prevented from others activities. For instance, if there are huge redemptions in the mutual fund then fund manager needs to create the liquidity by selling the most liquid stocks from the funds' portfolio. These changes may affect the investment of those investors who have invested in the mutual funds.

Fees Structure

Fees/subscription of PMS are negotiable. There are some companies which have the standard charges while some prefer a 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. Whereas in the case of the mutual funds 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.


The only difference on the taxation front is in the case of portfolio management services every time when a portfolio manager BUY or SELL the security it will incur you a capital gain and in the case of mutual fund whenever you will liquidate your mutual fund investment you will incur the capital gains which are taxed.

So now you know, what is portfolio management, how the portfolio management service works and how its different from mutual funds, now all you need to do is take a right call in a favor of wealth creation. Whatever the choice may be, remember you are not only investing money in the markets, but you are investing your time also if you are aiming to reap returns from the market movements. Take professional help in any case, if you lack there you can even get in touch with us. We at Niveza believe that Time is Money and we are there to help you all the time to take the right decision. For any queries you can reach us at 09637171436, we are there to help you.

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