Are Mutual Funds better than PMS
A mutual fund is an investment vehicle consisting of a portfolio of stocks, bonds, etc by a professional fund manager. The money is collected from the investors and is invested collectively by the professional fund manager.
Portfolio Management Service (PMS) offers professional management of investment to deliver high-risk adjusted returns. Qualified fund managers manage investors’ money by investing it in a portfolio of investment assets like stocks, bonds, fixed-income securities, etc for a fee.
These are pretty similar, but here are some differences between them-
A mutual fund is a pool of funds whereas a PMS is a portfolio designed for you in your demat account.
The minimum investment amount in the case of a mutual fund is as low as Rs 500 whereas a PMS requires a minimum of Rs 50 lakhs.
Equity Mutual funds have to invest up to 65 % in equity of the market condition. Whereas PMS are flexible with their investments and can increase or decrease their allocation to equity based on market conditions and investor requirements.
PMS focuses on performance and can make investment decisions such that the absolute returns are maximized. A PMS can have a concentrated portfolio whereas MFs portfolios are more diversified.
PMS is required to make timely disclosures to the clients, whereas in the case of MFs they are strictly regulated and all the information is in the public domain including the portfolio.
Investing in mutual funds is easy. If the investor’s KYC is complete, investment can happen right away. Whereas PMS documentation takes 15-20 days to complete and then only investments can be made.
An investor must choose PMS only when the set of mutual funds is not able to provide the same exposure. Usually, a portfolio size of Rs 2-3 crore will let an investor allocate Rs 50 lacs in a PMS.