While we all are caught up in the glitter and fun of Diwali this year, the market downfall and low festival bonus may hamper your spirits down by a notch. But remember that even during these trying times, there are a few people who are looking to bank on some extra cash from your pockets. And these are none other than Portfolio Management Services (PMS) organizations who try to snatch that festival bonus of yours, turning it into their revenue. These companies would do anything to attract your attention, convincing you that the best way to attain constant profitability in the market would be through them, particularly when stocks were offered at attractive rates. As a wise investor, do not take this as a cue to say farewell to your good old mutual fund distributor and fall in the trap of a tempting PMS offer.
The only similarity between an equity mutual fund and a PMS is that they both make investments in stocks and other related investments on behalf of their clients and investors. However, the mutuality stops right there. There is a huge difference in the minimum corpus investment required by equity mutual funds and PMS schemes as you can invest with just a few thousand rupees in an equity mutual fund. However, for a PMS scheme, a minimum investment amount of a few lakhs of rupees is mandatory. Also, there is a vast difference in the nature of the holdings between both the categories of investments. In PMS schemes, you can make investments in securities whereas in equity mutual funds, you invest in units. This difference is evident when a large investor seeks to redeem his units, and the fund manager is forced to sell the holdings, as it may have an adverse impact on the net asset value of the scheme. PMS schemes are flocked by the wealthy as they offer customized schemes and services to cater exclusively to your needs. You can see disparities between mutual fund units as well as PMS schemes even in the matter of fees charged, as while investors in mutual fund units are required to pay approximately 2.5% of their investments as fund management fees, investors in PMS schemes can choose between fixed fees and variable fees, thus making it a costly affair. You may also end up paying greater tax returns towards PMS schemes as compared to other mutual fund schemes. Walking out of a mutual fund scheme is comparatively easy as you need to only a small exit load, as compared to PMS schemes wherein the exit load is excessively higher as compared to mutual fund units.
Selecting a profitable category of mutual funds is a relatively easier task, as you have a wide number of publications and websites that offer all the required information on mutual funds. However, selecting a viable PMS scheme is highly challenging as you cannot find all the required information consolidated in one place. You will have to approach several providers before zeroing in on a scheme that would best suit your needs. But selecting a profitable category of mutual funds also give you the advantage of accumulating funds over a period of time such that your ability to borrow credit like loans, personal loans etc, are reduced to negligible. Even if you are in the dire need of such loans, you can always approach your bank or non nabbing financial institution who provide you loans these days that are cheaper. All you need to ensure is that are your financial records do not have any dents of financial defaults so that your loan application can be processed succesfully.