Things To Keep in Mind Before Investing in a PMS

 

Under portfolio management services, the portfolio managers help the individual in building the portfolio as per their needs and thus invest their money into financial products. The portfolio under PMS mainly comprises equities and that is why the chances of earning high returns are more. This is the reason why more and more investors are investing their money into portfolio management services nowadays. PMS has enabled the individual in building quality portfolios so that good returns could be achieved. Gone are the days when an individual has to manage their portfolio without any expert knowledge. All these are now being taken care of by investment managers India who have all the tools and knowledge in achieving the investment purpose of their clients.

There are various PMS providers in the market that claims to offer the best return but not all promises are true. Thus one must be careful in selecting the right PMS. The following tips will help you in finding the right PMS as per your requirements. These include:

Investment Horizon: The first and foremost thing that one must take into consideration the time horizon for which one wants to keep their money invested. There are three horizons namely short, medium, and long-term. The choice of PMS heavily depends upon the investment horizon as for different horizons different strategies are devised. Thereby one must be fully clear about the tenure of the investment as any mismatch in this regard will lead to non-fulfillment of one's investment goal.

Stock Selection: The stock selection of PMS is another crucial aspect that cannot be ignored. Every PMS has a certain stock selection strategy for arriving promising stocks to be included in the portfolio. The stocks so selected could be leaders while others might be laggards. If the laggard stocks are more in number than the leader then the overall return of stock would be impacted. The portfolio manager must not make too many wrong bets as it will lead to a low rate of return for the investors. Thus the investor must pay attention to the PMS stock selection and also their past performance.

Portfolio Performance: Portfolio performance can be judged through the model portfolio consisting of various promising stocks. This will give an idea to the investor of how the portfolio will be performing by measuring the model portfolio performance against the selected benchmark. The right portfolio is one that performs better than the benchmark selected during bull runs and loses less than the benchmark in case of a bear run.

Lock-in Period: The period for which an investor is not allowed to redeem their investment is called the lock-in period. It is the commitment of one’s money and thus one must be clear for how long they are comfortable in not withdrawing their fund. Usually, a long lock-in period often poses a challenge because of the inability to redeem the money in case of emergencies. Thus PMS with a shorter lock-in period is recommended.

Hence these are some of the essential tips that will help in selecting the right equity portfolio management services for better and higher returns.