What are portfolio management services?
Portfolio management services or PMS offer customised investment solutions to investors to help them attain their financial goals. Portfolio management services construct investment portfolios across various investment options, and portfolio managers take care of the investment portfolio. These services help investors maximise returns over time by focusing on the time horizon, risk profile and investment objectives. Many High-Networth Individuals (HNIs) opt for portfolio management services as tailor-made portfolios are constructed after considering investment horizon, risk tolerance, liquidity, and taxation. Moreover, entities offering PMS services must be registered with SEBI, eliminating fraud and malpractices, these services are popular among HNIs, HUFs, partnership firms, NRIs, Association of Persons, Sole Proprietorships etc. Portfolio management services specify a minimum ticket size for investor portfolios.
What are the objectives of Portfolio Management?
Capital appreciation:
Many investors opt for PMS to earn higher returns from a professionally managed portfolio. The focus remains on risk-adjusted returns from investments.
Regular income:
Many people opt for PMS to get a steady income. The main objective of the portfolio manager is the protection of capital and consistent benefits from investments.
Liquidity:
Many investors opt for PMS to convert their investments into cash as soon as possible. It is vital if they need money to start a business. In such cases, the portfolio manager builds customised portfolios to cater to clients’ liquidity needs.
Tax Planning:
PMS focuses on tax planning to increase the after-tax return of investments. It helps to construct a portfolio after looking into the tax efficiency of investments. In simple terms, PMS offers the twin advantages of capital appreciation and higher after-tax returns from investments.
What are the key elements of portfolio management?
Asset Allocation:
The portfolio manager focuses on asset allocation, the investment strategy that balances risk and returns. It involves spreading investments across the asset classes of stocks, fixed income securities, cash, commodities and real estate. Asset Allocation makes sure that a sharp fall in one asset class does not impact the overall portfolio performance.
Diversification:
Diversification is a technique of allocating capital across a variety of investments. While asset allocation focuses on the percentage of stocks, bonds and cash in your portfolio, diversification involves spreading assets across asset classes within these buckets. Portfolio managers of PMS use the diversification strategy to enhance the portfolio’s risk-adjusted returns.
Rebalancing:
PMS Portfolio Managers focus on rebalancing the portfolio to align with investors’ financial goals and risk tolerance.
Conclusion:
Portfolio management focuses on developing investment strategies to help investors attain their financial goals based on the investment horizon and risk profile. Portfolio managers build customised portfolios to match clients’ requirements of capital appreciation, regular income or liquidity.
