Over time, people have become increasingly knowledgeable about investments. Many investment tools have been launched into the market.
People have been more into investing lately, all thanks to the increasing awareness about wealth creation.
High-net-worth individuals (HNIs) seek professional Portfolio Management Services (PMS) for assistance.
Many individuals like to manage their investment portfolios themselves. However, HNIs with major assets in their name find it challenging to do so.
So, they show interest in hiring dedicated fund managers to manage their portfolios. Generally, it is a huge challenge to manage the assets and investments of High net worth individuals.
Therefore, there is a need for a research team, including a portfolio manager. The main advantage of using PMS is that it reduces risk.
Also, it maximizes the returns. The best part is that you can make worthy financial decisions with the help of the research team and fund managers.
What are Portfolio Management Services?
Portfolio Management Services are mainly aimed at offering dedicated services to investors. They are tailored as per the requirements of the investors.
The role of a fund manager is to develop exclusive portfolio management strategies. Further, they thoroughly analyze investors’ risk appetite.
Also, they look into the investors’ investment frequency. Whether your target is to build wealth or plan for a secure retirement, portfolio management services can support your investment journey in every way possible.
Top investment companies and experienced fund managers offer Portfolio Management Services (PMS).
Through PMS, fund managers handle stocks, bonds, securities, mutual funds, and more for investors.
They use their expertise to match investment portfolios with investors’ financial goals. Here, the essential purpose is to bring significant returns to the investors.
How does Portfolio Management Services Work?
Investors use the Portfolio Management Services to manage their investments professionally. Specifically, investors with high net worth choose PMS.
Firstly, the dedicated fund managers study the investor’s financial profiles. Secondly, they devise strategies for handling the investments. Also, with PMS, the wealth creation is relatively high.
However, the question here is, how does the PMS work? At first, the investor has to do some good research and find a PMS house.
He must tie up with the house and get a portfolio manager. The dedicated portfolio manager will look into the investor’s investment portfolio.
The main job of a portfolio manager is to tailor investment strategies to fit the client’s financial goals. T
he portfolio manager must also look into ways to reduce the investment risk. Also, he must work on diversifying the investment portfolio.
The fund manager will study market trends. Further, he suggests low-risk investments. Nevertheless, the portfolio manager is not responsible for the client’s losses; this is clearly stated in the agreement.
Coming to the charges, employing a portfolio manager is expensive. The portfolio manager oversees all the investors’ assets and investments.
Also, he must consider the risk profile, financial goals, and more. In simple terms, they charge a percentage of the investment.
Types of Portfolio Management Services
Portfolio management services are divided into four types. We have discussed them in detail here. Have a read!
Active Portfolio Management
The main goal of this method is to boost returns. Instead of investing all the assets in one place, the portfolio manager spreads them across various investments.
This further avoids the risk of losing investments in case of market fluctuations. Using this method, investors can avoid risk and also attain higher returns.
Passive Portfolio Management
As the name suggests, fund managers invest in passive funds in this model. They observe market trends closely and invest in index funds, which grow passively.
This method is popular with investors who prefer to keep their funds invested longer.
Discretionary Portfolio Management
In this method, the fund manager creates a specific strategy for managing the investor’s portfolio.
They assess the investor’s risk tolerance, financial goals, and investment period to suggest a suitable plan. The portfolio manager is responsible for the investor’s investments.
Non-Discretionary Portfolio Management
In this method, the portfolio manager acts as an advisor. He advises the investor on investments and risk management. The investor is highly involved in the decisions.
The investor has to give a green signal to the fund manager so that he can proceed with the investments on the investor’s behalf.
Benefits of Portfolio Management Services
Let us look at the benefits of leveraging portfolio management services.
Customizable
The portfolio management services are highly customizable. They can be adjusted to fit the investor’s risk levels and interests.
The fund manager analyzes the risks and goals and customizes the strategies accordingly.
Expert Guidance
Investors can get expert guidance from fund managers regarding high-performing funds. The fund manager significantly impacts the investor’s financial decisions.
Also, with their expertise, an investor can avoid substantially the risk of market fluctuations. Moreover, they work hard to bring profits to the investors.
Diversification
Diversification is one of the significant benefits of PMS. Through diversification, investors can greatly reduce the risk of losing investments and explore different investment options.
Besides, diversification of assets not only reduces risks but also increases returns.
Transparency
With portfolio management services, investors can examine their assets and investments transparently.
They have complete control of their investments’ direction and returns. Investors also receive the latest reports to better understand their investments.
Convenience
Employing a portfolio manager allows the investor to highly rely on him for making investment decisions.
The fund manager reviews the investor’s profile and then suggests suitable investments. This is very convenient for the investor, as he can use his precious time on other work.
Risk Management
A portfolio manager’s primary purpose is to reduce risk in investments. They must devise strategies to avoid potential risks.
They should focus on diversifying the portfolio, reducing risks, and preventing losses.
Regulation of Portfolio Management Services
Portfolio Management Services (PMS) must follow strict regulations. SEBI regulates PMS, and portfolio managers are required to act accordingly.
Only SEBI-registered fund managers are eligible to offer portfolio management services to investors.
Fund managers strictly follow the regulations when suggesting investment options to investors. They must also provide performance reports to the investors as per the regulations.
Also, they should work towards achieving the investors’ financial goals rather than prioritizing their financial interests.
Performance Management of Portfolio Management Services
With portfolio management services, performance management is a piece of cake. Investors can effortlessly analyze their investments’ performance.
Also, they can attain reports of the same with the help of PMS. Top PMS companies offer websites or apps to help investors.
The apps show detailed information about investors’ assets and investments. Through the apps, investors can quickly check the reports from the sources.
Moreover, investors can compare their investments’ performance with their aligned financial goals.
They can also compare the risk and returns in the long run. This can further determine whether the investments are growing over time or not.
Challenges of Portfolio Management Services
We discussed the benefits of PMS earlier, so let us now look at its challenges.
Market Volatility
Market volatility is a big concern in the finance industry. Moreover, even the best PMS can sometimes lead to poor returns.
This is one of the significant challenges that the fund manager faces.
Expensive
Portfolio management services can be costly. Managing investors’ assets can be challenging, and the fund manager should avoid significant losses.
So, fund managers and portfolio management companies often charge high fees.
Tax Regulations
Investors must be aware of their investments, especially where their money goes. They should look into the lock-in period, if any.
Sometimes, the money gets stuck, and withdrawing could be challenging. Additionally, changing tax laws might require adjustments to investment strategies.
Portfolio Management – Conclusion
Understanding the portfolio management services and its benefits is a good idea if you are a high-net-worth individual.
Also, you must be aware of the challenges that come with them. If you are busy and cannot handle your investments, you can rely on PMS.
Also, you can contact PMS when you lack the knowledge to double your wealth. Learn that you can get your PMS customized.
So, there is nothing to bother about. Also, you can enjoy higher returns and avoid risks by relying on dedicated portfolio managers.