PMS
Professional Management of Investments to deliver Excellent Risk-Adjusted Returns
Portfolio Management means the systematic selection and control of one’s investments based on the investor’s goals. PMS allows to strike a balance between the financial implementations and maintenance of the business, whilst optimizing the returns.
What is Portfolio Management?
Portfolio Management in finance can be defined as the type of process in which an individual’s investments are managed to maximize the returns over a given period of time.
Primarily Portfolio Management serves as a SWOT analysis for the market volatility and the risk appetite of the investor to assess the different investment avenues available. In return, PMS helps to generate and protect returns against market risks.
Types of Portfolio Management
Portfolio management can be classified into the following ways:-
Here the Portfolio Managers are given the authority to invest on the behalf of the investor. On the basis of the investor’s risk appetite and financial goals, the portfolio manager will choose the appropriate investment strategy.
Here the Portfolio Managers provide investment advice to the investor. It is up to the investor to work on the advice or not. The Manager can only execute the decisions taken by the investor.
In this type of arrangement, the portfolio manager’s main motive is to generate maximum returns. Generally, they purchase stocks while being undervalued and sell them off when the value increases.
This arrangement is concerned with a fixed profile that aligns with the current trends. Generally, the Portfolio Managers go for a stable investment with low returns but that is profitable in the long run.
How will you benefit from Portfolio Management?
Let’s take a look at the benefits of Portfolio Management Services:-
- Focused Approach on the Financial Goals
- Efficient use of the Scarce resources
- Portfolio Management is carried out by experienced professionals
- Freedom from Decision Making regarding Risky Investments
- Controlled Risk Approach towards Investment Diversification
- Continuous Monitoring of the investments
Objectives of Portfolio Management
The primary objectives of Portfolio Management are :
- Capital Growth: Portfolio Management assures the investor growth in the capital by reinvesting or purchasing more growth securities.
- Liquidity: PMS is planned in a way to facilitate the advantage of any opportunity available in the market. The manager should always ensure to have liquid funds available on short notice.
- Security: Risk Minimization is an important aspect of portfolio management. Portfolio managers should make sure that the investments are safe.
- Tax Planning: Portfolio managers plan out everything in an effective way to save taxes while being extremely profitable.
- Lower Risks: Portfolio managers diversify the investments to reduce the risk of industries and maximize gains.
- Stable Returns: PMS ensures that returns are stable and profitable. The returns are either taken out or reinvested in other profitable portfolios.
Advantages of Portfolio Management
The main advantages of Portfolio Management are as follows:-
- Track Investment Performance: When the investments are grouped together in a portfolio, comparing them becomes easier.
- Enhanced Financial Understanding: Managing your investment portfolio can help you to learn the deeper aspects of the financial market.
- Investment Adjustment: Active portfolio management will allow you to assess the debt-equity ratio from time to time and thus you can readjust the portfolio according to the market trends.
- Liquidity Management: Portfolio Managers can plan out everything thoroughly so that liquid funds can be acquired even on short notice.
- Correct Investment choices: A portfolio can help you to have a holistic look at the market trends and accordingly plan the investments that are right for you.
- Disciplined Approach towards Investing: You can inculcate the habit of investing with the help of portfolio management. Ex- You can start monthly investments with SIP.
What is the Importance of Portfolio Management?
With so many advantages to offer, the need for Portfolio Management has become very important in the current times.
- The New Investors can manage their risks efficiently with PMS.
- Investors may not face Fund Shortage at emergency times since Portfolio Management always takes into account some Liquid Assets Investments.
- Investors can easily Customise their Investment Portfolios according to the expected Returns and Market Volatility.
- Any changes in Tax Laws can also be taken into account.
- The Fund Allocation can be done in favor of Maximum Returns.
FAQs on Portfolio Management (Frequently Asked Questions)
The portfolio Manager’s services include responsibility for a client’s Portfolio of Securities. The Manager advises, directs, or executes investment decisions on the behalf of the client.
The minimum net worth required for a Portfolio Manager is 5 Crore Rupees.
You can benefit from PMS in the following ways:-
- Reduced Risk
- Professional Help in Investment Decisions
- Personalized Investment Attention
- Benefits of Equity as an Asset Class
- Track Financial Performance Regularly
The Investor can use cash or an existing portfolio of Stocks, Mutual Funds, and Bonds with the help of the Portfolio Manager to revamp his profile.
The Tax Liability of the investor will remain the same as if the investor is accessing a capital market directly,
Individuals, partnership firms, sole proprietorship firms, HUFs, and Body Corporates.
Portfolio Management Process includes the shortlisting of a firm’s projects in alignment with its financial goals and the capacity to deliver. The portfolio manager will implement the changes and maintain the usual business while optimizing the ROI.