Portfolios of investments usually include holdings in stocks, fixed-income securities, commodities, real estate, and gold. Depending on their willingness to take risks, investors must choose the right investments to reach their financial objectives.
Nevertheless, new investors are unable to evaluate their capacity for risk and may lack the knowledge and time necessary to choose suitable investments for their portfolios. Portfolio management services are an option for those who require assistance creating an investment portfolio. Let us understand what portfolio management services are.
Portfolio Management Services
Portfolio management services are popular among High-Net-Worth Individuals (HNIs) because custom portfolios are created after considering taxation, liquidity, risk tolerance, and potential investment opportunities. Additionally, SEBI registration is required for organizations providing PMS services, which prevents fraudulent activity and other crimes.
HNIs, HUFs, partnership firms, NRIs, associations of individuals, sole proprietorships, etc. all prefer portfolio management services. For investor portfolios, portfolio management services require a minimum ticket size.
What are the different types of Portfolio Management Services in India?
- Active Portfolio Management: The goal of active portfolio management is to outperform benchmark indices like the Nifty 50 or the BSE Sensex in terms of returns. The necessary securities are selected by the research team, and the portfolio manager actively manages the investment portfolio. Investors who desire greater capital gains and have a higher risk adaptability opt for active portfolio management. When undervalued stocks reach their full potential, the portfolio manager sells them at a higher price. In addition, the portfolio manager diversifies the investments in the portfolio to reduce investment risk.
- Passive Portfolio Management: The goal of passive portfolio management is to replicate the results of a market index, such as the Nifty 50. To provide investors with returns consistent with the index it tracks, the fund manager monitors and replicates the stock market index portfolio. The focus of passive portfolio management is on index funds, which are mutual funds that resemble portfolios of market indexes. Additionally, compared to Active Portfolio Management, the Passive Portfolio Management strategy has lower transaction costs because the portfolio manager doesn't frequently churn the portfolio.
- Discretionary Portfolio Management: The portfolio manager for Discretionary Portfolio Management Services has full control over the portfolio and is free to use any approach to accomplish investment goals. Clients have minimal control over investment decisions, which are made solely at the portfolio manager's discretion.
- Non-Discretionary Portfolio Management: The portfolio manager offers investment suggestions under Non-Discretionary Portfolio Management Services. Clients decide whether to implement these investing ideas, but the portfolio manager is ultimately responsible for trade execution. When providing non-discretionary portfolio management services, the fund manager makes investment recommendations and follows the client's instructions.
Objectives of Portfolio Management
- Capital growth: To get higher returns from a professionally managed portfolio, many investors choose Portfolio Management Services. The emphasis is still on risk-adjusted investment returns.
- Regular income: Many people choose Portfolio Management Services in order to have a consistent income. The protection of capital and steady returns on investments are the portfolio manager's major goals.
- Liquidity: To turn their investments into cash as quickly as possible, many investors choose PMS. If they require funding to start a business, it is essential. In these circumstances, the portfolio manager creates tailored portfolios to meet the liquidity demands of clients.
- Tax Planning: To improve the after-tax return on investments, Portfolio Management Services emphasizes tax planning. It is beneficial to build a portfolio after researching the tax benefits of various investments. Simply said, PMS provides the advantages of capital growth and increased investment after-tax returns.
Significant elements in portfolio management
- Asset Allocation: Asset allocation, the investment strategy that balances risk and returns, is the focus of the portfolio manager. It entails distributing investments across the stock, fixed income, cash, commodity, and real estate asset classes. A significant decline in one asset class does not adversely affect the performance of the entire portfolio due to asset allocation.
- Diversification: The process of distributing wealth among various investments is known as diversification. Diversification entails distributing assets among various asset classes within these groups whereas asset allocation focuses on the proportion of stocks, bonds, and cash in your portfolio. The diversification approach is used by PMS portfolio managers to increase the portfolio's risk-adjusted returns.
- Rebalancing: The main objective of PMS Portfolio Managers is to rebalance the portfolio in accordance with investors' financial objectives and risk tolerance.
Based on the investment horizon and risk profile, portfolio management is focused on creating investment strategies to assist investors in achieving their financial goals. To meet the requirements of their customers for liquidity, regular income, or capital appreciation, portfolio managers create customized portfolios.
Get your portfolio managed by our best PMS experts
Archers Wealth offers bespoke Portfolio Management Services - to help you make long-term investment choices. Our goal is to create a diversified portfolio with advantages like solid risk management and seamless reporting that includes a proportionate mix of currencies, commodities, derivatives, and more.
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