Understanding Portfolio Management Services in India: Meaning, Types and Benefits

Are you an Indian investor looking to maximise returns on your equity portfolio without the hassle of day-to-day management? Portfolio Management Services (PMS) might be the solution you’ve been searching for.

What is Portfolio Management Services (PMS)?

Portfolio Management Service (PMS) is a professional financial service in India that empowers investors by entrusting their equity portfolios to skilled portfolio managers and stock market professionals. These experts work hand in hand with dedicated research teams to ensure that your investments are managed effectively. The primary goal of PMS is to systematically maximize returns while minimizing investment risks. It allows you to make well-informed decisions supported by extensive research and data, all without lifting a finger. Moreover, it equips you to face market challenges with confidence.

Let’s delve deeper into this service and understand its various aspects.

Types of Portfolio Management Services

In India, PMS offers four popular types:

  1. Active Portfolio Management: This approach focuses on maximizing returns by diversifying investments across asset classes, industries, and businesses, ultimately reducing risks. Compared to passive management, it involves higher turnover.
  2. Passive Portfolio Management: Passive management aligns portfolios with the current market trend. Managers often choose to invest in index funds, allowing investments to grow passively over time with minimal intervention. While it boasts a low turnover, it offers reasonably good long-term returns.
  3. Discretionary Portfolio Management: In this method, portfolio managers take charge of managing a specific portfolio based on your objectives, risk tolerance, and investment duration. They tailor the strategy to your unique needs.
  4. Non-Discretionary Portfolio Management: Here, portfolio managers provide investment advice, but the final decision lies with you. Once you approve, they take appropriate actions on your behalf.

Benefits of Portfolio Management Services

Choosing PMS in India brings several advantages:

  • Expert Opinion: Your investments are managed by experienced professionals who navigate market volatility skillfully, aiming to increase your profit margin.
  • Customised Plans: Portfolio managers tailor investment strategies to your financial objectives, income, budget, risk tolerance, and age.
  • Efficient Risk Management: Reducing investment risk while increasing returns is a portfolio manager’s primary goal. They achieve this by diversifying risk exposure.
  • Regular Monitoring: Portfolio managers closely monitor asset performance and returns, adjusting your investments to align with your financial goals.

PMS enables you to sit back, relax, and enjoy the benefits of your investments while experts handle the complexities of the market.

Why Opt for Portfolio Management Services?

Consider PMS if:

  • You have a high net worth.
  • You lack extensive knowledge of investments.
  • You’re short on time to manage and rebalance your investments.
  • You’re unfamiliar with market volatility and safeguarding strategies during uncertain times.

Understanding various risks: 

Understanding the different types of risk is the first step in learning how to manage your portfolio, significantly when investing through portfolio management services. Losing money or earning less than expected is often termed as a risk in layman’s language. It is crucial to have a solid familiarity with how money works in the share market, the pros and cons of the market, and its volatility. The risks associated with portfolio management services investments are listed below.

  1. Market Risk: It’s the risk that investments will gain/lose value due to changes in market developments. Equity, interest rate, and currency risk are examples of this. If the stock market falls, the stock mutual funds in your portfolio may fall. And bond prices rise, so the value of your bonds.
  • The risk of loss caused by a decline in the market price of shares is known as equity risk.
  • Similarly, interest rates pertain to debt, such as bonds. For example, if interest rates rise, the market value of bonds falls.
  • Currency risk applies to foreign investments. It is the risk of losing money due to currency exchange rate fluctuations.
  1. Interest-Rate Risk: This risk is considered synonymous with fixed-income investments. As a result, the valuation of your bond/fund is likely to fall as interest rates rise.
  1. Inflation Risk: Your portfolio is bound to lose value as the purchasing power of your savings decreases due to inflation. This type of risk should be considered in PMS when evaluating conservative investments such as bonds, bond funds, and money market funds as long-term investments. Even if your investment grows over time, it will lose value if it does not keep up with the inflation rate.
  2. Liquidity Risk: The inability to sell your investment when you want them is termed liquidity risk. Or, sometimes, you are forced to sell the investment, and you may have to accept a lower price. Some investments, such as exempt market investments, may not be able to be sold at all.
  3. Concentration Risk: This type of risk is bound to rise and affect you if you tend to proceed only with one type of investment. As a result of this, to divide the risk and focus on maintaining the risk-return ratio, it is always better to diversify your investments across various companies, industries, and geographical locations.
Mutiple risks affect PMS

Calculate Portfolio Risk

To calculate the risk of a portfolio, you can use a number of statistical measures, such as standard deviation, beta, Sharpe ratio, and value at risk (VaR).

Standard deviation measures the volatility of a portfolio’s returns, while beta measures the volatility of a portfolio relative to the overall market. The Sharpe ratio is a measure of the risk-adjusted return of a portfolio, and VaR measures the potential loss of a portfolio over a given time period with a certain level of confidence.

To calculate these measures, you will need to gather data on the portfolio’s returns and other relevant factors, such as the risk-free rate and the overall market returns. You can then use statistical formulas or software tools to calculate the desired risk measure. It is important to note that the specific method used may depend on the specific needs and goals of the investor, as well as the characteristics of the portfolio.

Key Takeaways

Remember that your portfolio management service provider will not be liable for losses incurred due to the Inflation and Market risks mentioned above because they are caused by unforeseen events in a highly dynamic environment. As a wise investor, we recommend that you know the common investing mistakes and the overall impact of risk sensitivity and time horizon when making decisions related to your investments in the stock market.

Final Words

While some risks are associated with portfolio management services, consider that PMS allows you to hold individual stocks while delegating fund and portfolio management to a professional. So, what are you attempting to hold out for? Go ahead and research the best platform and start investing today.


How do I choose between active and passive Portfolio Management Services?

The choice between active and passive PMS depends on your risk tolerance and investment goals. Active PMS aims for higher returns but involves more frequent adjustments, while passive PMS offers long-term stability with minimal intervention.

Are Portfolio Management Services only for high-net-worth individuals?

While PMS can benefit high-net-worth individuals, it’s not limited to them. Anyone seeking professional portfolio management and personalized strategies can opt for PMS in India.

What role does risk tolerance play in Portfolio Management Services?

Risk tolerance influences your portfolio’s asset allocation and investment strategies. Portfolio managers consider your risk tolerance to ensure your investments align with your comfort level.

How much does a Portfolio Manager charge in India?

The fee charged by a portfolio manager in India can vary based on the type and quality of service provided. According to SEBI regulations, the fee can be a fixed amount, a performance-based fee, or a combination of both. It should not exceed 0.5% per year of the client’s average daily assets under management (AUM).

Is it good to invest in PMS?

Whether it’s good to invest in PMS depends on factors like your investment objectives, risk tolerance, time horizon, budget, and preference. PMS can be a suitable option if you have a high net worth, a high risk tolerance, a long-term perspective, and desire personalized portfolio management. However, consider drawbacks such as high fees, and limited diversification, .


Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.