Portfolio Management Service #IntermediaryInvestor

We’re sure you must be aware of the fundamentals of PMS by now, but do you know enough to start investing in the same? Not sure? Here’s what you need to know!

What are the benefits of PMS investing? 

– Advantage of equities as an asset class

– Solutions customized to the needs of HNIs and UHNIs

– Personalized attention

– Portfolio Managers take buy/sell decisions on behalf of, but in consultation with a client

– Portfolio Managers regularly interact with clients to update them on portfolio strategy, performance, and market outlook

What are the risks associated with PMS investing?

All investments involve a certain amount of risk, including the possible erosion of the principal amount invested, which varies depending on the security selected.

What is the tax treatment of PMS?

Profits from churning in PMS investment will be treated as normal Capital Gains and equity taxation rules will apply. This means that any short-term capital gains (less than 1 year) will be taxed at 15% and any long-term capital gains will be taxed at 10% without indexation benefits. However, the investor should consult his / her tax advisor for the same. The Portfolio Manager ideally provides an audited statement of accounts at the end of the financial year to aid the investor in assessing his / her tax liabilities.

Can Portfolio Managers offer indicative or guaranteed returns?

No, portfolio managers do not offer guaranteed or indicative returns. It has to be distinctly understood that investing in equities is a risky proposition and there exists a risk to the principal amount invested. Further, SEBI guidelines prohibit the portfolio manager from guaranteeing or indicating a return, either directly or obliquely.

What are the types of PMS services available in India?

– Active Portfolio Management: An active portfolio manager will take different positions than that of the tracking index, actively buy and sell securities as per institutional research to create more returns than the index. 

– Passive Portfolio Management: Such a PMS strategy aims to mimic the performance of an index by investing in the same securities with similar weights.

– Discretionary Portfolio Management: The portfolio manager is given complete control of the portfolio and is free to adopt any strategy which is suitable to the IPS.

– Non-discretionary Portfolio Management: The PMS will only suggest investment ideas while the investor will be responsible for choosing the recommendation and timing.