Portfolio management services, commonly called as a PMS, refers to a professional financial service in which skilled and experienced portfolio managers and stock market experts tend to manage equity portfolio. They seek help from their experienced research team. While several investors have equity portfolios in demat account, managing those investments can be a challenge. PMS is referred to a systematic approach to optimize returns while minimising risk factor on investments. Investment portfolio can be diversified across sectors and industries and such services can be customised, structured and tailored to meet investment objectives depending upon risks, rewards and goals of an investor.
Since PMS provides customized equity options, an investor is required to have a large sum of money to invest. On the basis of a thorough understanding of businesses, a portfolio manager focuses on improving investor's gains. Portfolio manager needs to have a clarity of investor's risk and reward expectations to use appropriate and suitable strategy.
There are 4 popular types of PMS-Active portfolio management, Passive portfolio management, Discretionary portfolio management, and non-discretionary portfolio management. In active portfolio management, portfolio manager's primary focus is on maximising returns. Under this, portfolio manager reduces risk of the investments as he/she diversifies them across asset classes and industries.
Passive portfolio management focuses on fixed profiles which are in line with current market trend. Under this, portfolio managers invest in index funds that grow passively over time. While there is minimal intervention, it provides reasonable long-term returns.
In discretionary portfolio management, portfolio manager is provided with full flexibility to make decisions for the investor. On the basis of individual goals, risk appetite and time-frame, the manager adopts appropriate strategy which can be best suited. Charges for such managed funds tend to be higher due to higher involvement in decision making.
Non-discretionary portfolio management is referred to that method in which portfolio managers offer suggestion and advise. In this, the final decision is made by the investor.