Table of Contents
Portfolio management presents the best investment plans that suit the clients as per their income, age, budget, ability to take risks, etc. Portfolio management also reduces risk and also increases the chance of making a profit. This will helps the portfolio managers to provide customized investment solutions to the clients as per their requirements. It provides a strategy & a solution based on the need and suggests the best route that an investor should take. To make the process easy, you must create some order, and this is why portfolio management comes into action.
1. What Is Portfolio Management Services (PMS)?
Portfolio Management is the art of managing an Individual’s investment. It can be in the form of bonds, shares, mutual funds, etc so that the investor can earn maximum profit with minimum risk within a stipulated period of time.
Portfolio Management service is a professional financial service where skilled and qualified portfolio managers assist & manage the investments of their clients.
Who is a Portfolio Manager?
A Portfolio manager is a skilled professional who is responsible for maintaining the investment portfolio. The portfolio manager counsels the individual’s nad advice them on the best investment plan which guarantees a maximum rate of return. Portfolio managers have the full right to make buying & selling decisions on behalf of their clients. A portfolio manager is one of the most important factors to consider when looking for investment.
Roles And Responsibilities Of Portfolio Managers –
- Portfolio managers must be transparent. Never hide anything from the investor. Be honest for a long time relationship
- Portfolio managers must be good at decision-making.
- Be accessible to the clients
- Ought to be Unbiased & Professional.
- Never sign any document on behalf of the client
- Responsible for making the investor aware of the investment tools.
- Plays a vital role in deciding the best plan which is suitable for the investor.
- Must be aware of the latest changes in the financial market.
- Be patient. Don’t ever get hyper with the clients.
- It is the duty of the portfolio manager to suggest to the investor where to invest and where not to invest.
2. Benefits Of Portfolio Management
List of benefits you can avail yourself if you go for Portfolio Management Services
Expert opinion on your investment
The benefit of using portfolio management is that your investment is safe in the hand of professionals. The portfolio managers will manage the portfolio effectively and focus on increasing the profit margin.
Customized Investment Plans
The portfolio managers customize investment plans according to their client’s income, budget, age, etc.
Efficient Risk management
The portfolio manager focuses on reducing risk when the profit is increasing. They will expand the risk involved so that the investor does not suffer any loss when the trend of the market changes.
Tax Planning
A properly managed portfolio will offer a supportive shelter from taxes to the investor. Know more about Tax Planning.
Capital Appreciation
A good investment portfolio will result in an increase in capital to protect the investor from a decrease in purchasing power due to uncertain reasons.
3. Why You Should Choose Portfolio Management Services?
Higher Marketability
A portfolio that is well maintained will consist of investment instruments that can be easily sold in the market or it can be marketed easily.
Stable Return Rate
Portfolio investment should result in a balanced flow of return once investment safety is ensured.
Optimum Liquidity
It ensures that the investor has enough funds to meet his liquidity needs. It is recommended to keep some credit as reserves to use in any case of emergencies.
Investment Safety
It offers the safety of investment to the investor.
Transparency
It is mandatory for Portfolio management service providers to be registered with the Securities & Exchange Board of India(SEBI) which ensures that the portfolio management is transparent and it is functioning under the guidelines provided by SEBI.
Types of Portfolio Management Services
Active Portfolio Management Services
Portfolio managers handle buying and selling securities in order to gain maximum return.
Passive Portfolio Management Services
Portfolio managers handle fixed investment portfolios to keep up with the market dynamics
Discretionary Portfolio Management Sevices
In this type, the portfolio manager manages investment on behalf of the investor. The portfolio manager has the full right to make decisions on investment. For this, the investor must pay an amount as fee to the portfolio manager.
Non – Discretionary Portfolio Management Sevices
In this type, the portfolio manager only advises his clients to make a wise investment. The role of the portfolio manager is to provide proper guidance. Here client only is responsible for making investment decisions, not the portfolio manager.
4. Who should choose Portfolio Management Services?
- Investors who have limited knowledge about the investment market and market trends.
- Investors who do not have time to rebalance their investment portfolio & track their investment.
- Investors who do not know how the market forces influence their investment & its return.
5. What are the risks involved in PMS?
Purchasing Power Risk
Purchasing power risk is the risk that involves the chances that the return from the investment will not be worth as much in the future due to inflation.
Loss of Principal Risk
Loss of principal risk is seen in all investments, except for savings accounts or fixed deposits. It involves a chance of losing the principal amount invested or at least a portion of the investment.
Sovereign Risk
This risk occurs due to a country facing financial difficulty due to which they are unable to bring back their payments upon the termination of the debt.
Process of PMS
- Identification of objectives: It is the duty of the investor to identify suitable objectives which can be stable returns.
- Estimating the capital market: Expected risk & returns are analyzed.
- The decision about asset allocation: The sound decision must be made about the suitable ratio to generate earnings at minimum risk.
- Formulate: Formulating suitable portfolio strategies:
- Selecting the profitable investment & securities: Profitability is analyzed on the factors of fundamentals, credibility, liquidity, etc.
- Implementing portfolio: The planned portfolio is put into action.
- Evaluating & revising the portfolio: Evaluation & revision should be made on a regular basis to evaluate its efficiency.
- Rebalancing the composition of the portfolio: Rebalanced frequently to maximize returns.
6. What Are The Services Provided Under PMS?
Helps in deciding the best investment plan
The PMS plays a vital role in deciding the best investment plan which is suitable for the investor based on his/her budget, income, age, etc
Continuous monitoring
PMS continuously monitors the periodic changes that occur in the market to optimize the results.
Customized Advice
A portfolio manager gives customized advice to their investors on plans, market trends, etc.
