Know your investment portfolio

What is a portfolio?
A portfolio is a combination of financial assets viz. commodities, currencies, stocks, bonds and cash equivalents and their fund counterparts, including mutual funds, exchange-traded also consists of non-publicly tradable securities like real estate and private investments.

What is portfolio management?
It is an art and science in the decision making of balancing risk against performance about investment to objectives, matching, mix and policy of asset allocation for individuals and institutions.

Who is a portfolio manager?
A portfolio manager is a person or a group of people responsible for investing a mutual, exchange-traded or closed-end fund’s assets, implementing its investment strategy and managing day-to-day portfolio trading. A portfolio manager is one of the most important factors to consider when looking at fund investing.

What is a permanent portfolio?
A permanent portfolio theory is constructed by free market analyst Harry Browne. As per his belief that the permanent portfolio is safe, secure and profitable in any economic climatic conditions. The portfolio has to split into government bonds, precious metals, T-bills, and growth stocks and rebalance annually for safety and growth.

What is portfolio screening?
Selection of monitoring services to your holdings to fulfill client/investor mandates, review, manages reputation, identifying controversial situations, customized, reporting and support from experts without compromising your investment goal.

Who manages the portfolio and how?
Portfolios are managed by financial professionals, experts and money managers make a move with risk tolerance and investing objectives after deep research, report study, company news, and financials, historical data, future events before making a decision on fund investment which is under their control. 

Hedge Fund Manager v/s Portfolio Manager

  • Hedge fund who is a non-traditional asset manager compared with a more traditional portfolio manager like a mutual fund professional.
  • Differences between the both are strategies, securities traded and charges from investors.
  • Portfolio Managers might take some risks, but Hedge Fund Manager takes a maximum risk to outperform the rest of the markets.

Portfolio management v/s Asset management

Portfolio Management: Is managing a range of investments for an institution, banking firms, companies like Goldman Sachs, ICICI fund, J.P. Morgan, etc., which are actively maintaining the invested portfolio by informed decisions, understanding and analysing the different kind of markets, securities, and the risks associated with it to ensure a better return than the market to fulfil the expected return of the client.

Asset Management: Is the super-set of Portfolio Management which offers both banking and investment services either client may a corporation/government/high net-worth individual and services viz., debit and credit cards, cheque book, cash and security services. Having a wider scope than portfolio and client are able to watch how their investment is being managed.

What is Portfolio Management Services?
An investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities managed by a professional money manager that can potentially be tailored to meet specific investment objectives. In discretionary services choice as well as the timings of the investment decisions rest solely with the Portfolio Manager. Non-discretionary services by the manager only suggest the investment ideas. The choice, as well as the timings of the investment decisions, rests solely with the Investor. In advisory services manager only suggests the investment ideas and choice, as well as the execution of the investment decisions, rest solely with the Investor.

Note: In India, a majority of Portfolio Managers offer Discretionary Services.


  • Provides professional management services.
  • Regular monitoring to optimize the results.
  • Controlling risk by a responsible research team with real-time information.
  • A company takes care of all the administrative aspects of the client’s portfolio with a periodic reporting.
  • A fair amount of flexibility in favor of compelling opportunities.
  • Comprehensive communications and performance reporting.
  • Investors will get regular statements and updates from the firm.
  • Web-enabled access will ensure that client is just a click away from all information relating to his investment.
  • Tailor-made investment advice designed to achieve his financial objectives.


  • PMS is assumed to be a tailor-made product, but in reality, it is may not be customized as per your current needs.
  • Charges are very high, which is in the range of 3-4% mostly.
  • PMS is considered as portfolio owned in your D-mat, hence taxed at a transaction level.
  • Heavy documentation and complex.

What is meant by Asset Management?
Asset Management is a financial team designated to manage the investments made by the client from market risks as well as to analyze detailed equity research reports to controlling their own money. Generally, services offered to corporations, governments, high net-worth individuals with a fixed percentage of fees and in profit for the fund manager.

Mutual Funds v/s PMS

Greater flexibility in comparison to mutual funds.

PM Access No access to Portfolio Managers (PM) Direct access to the PM who share updates on portfolio strategy and emerging trends
Customization Structured objectives applicable for all investors. Structured to address each investor’s specific needs/risk appetite.
Ownership Cannotinfluence buying and sell decisions or control their exposure to incurring tax liabilities. Investors directly own individual securities in their portfolio, allowing for tax management flexibility.
Liquidity Required to hold some cash to meet redemptions. Not required to hold cash to meet redemptions.
Minimum INR. 5000 minimum for lump sum investment. SEBI specifies a higher minimum investment of INR. 25 Lakhs
Flexibility Less flexible and inactive in cash management strategy. Greater flexibility in comparison to mutual funds.
Number of Stocks Most mutual fund schemes have anywhere between 50‐60 stocks PMS generally have a focused portfolio of 15‐20 stocks, enabling portfolio managers to carry out a meaningful allocation of stocks/sector where he/she is most bullish about

Who can invest in PMS?
Individuals and Non-Individuals such as HUFs, partnership firms, sole proprietorship firms and Body Corporate.

Are there risks associated with PMS investments?
Yes. All investments involve a certain amount of risk, including the possible erosion of the principal amount invested, which varies depending on the security selected.

The Procedure of obtaining registration as a portfolio manager from SEBI
The portfolio manager is required to pay a non-refundable application fee of Rs. 1,00,000/- by way of demand draft drawn in favor of ‘Securities and Exchange Board of India’, payable at Mumbai along with form-A and submitted to the following address:

Investment Management Department – Division of Funds-1
Securities and Exchange Board of India
SEBI Bhavan, 3rd Floor A Wing,
Plot No. C4-A, ‘G’ Block,
Bandra-Kurla Complex,
Bandra (E), Mumbai – 400 051

Is there any registration fee to be paid by the portfolio managers?
Portfolio managers have to pay of Rs.10,00,000/- as registration fee while granting certificate by SEBI.

What is the capital adequacy requirement of a portfolio manager?
The portfolio manager is required to have a minimum net worth of Rs. 2 crores

How long does the certificate of registration remain valid?
Certificate validity is 3 years. For Renewal, Portfolio managers have to apply 3 months before and renewal fees are Rs.5, 00,000

Is premature withdrawal of Funds/Securities by an investor allowed?
Premature withdrawn by the client before the maturity based on an agreement between the client and the management.

Can a Portfolio Manager impose a lock-in on the investor?
Portfolio managers cannot impose a lock-in on the investment but can charge exit fees from the client for an early exit, as laid down in the agreement.

Can a Portfolio Manager offer indicative or guaranteed returns?
A portfolio manager cannot offer/promise indicative or guaranteed returns to clients.

What kind of reports can the client expect from the portfolio manager?

  • The client has a right to obtain details of his portfolio from the portfolio managers such as a description of security, number of securities, the value of each security held in the portfolio, cash balance.
  • Turnover data for the relevant financial year.
  • Gains and losses such as bonus, rights, dividend, profits, and losses.
  • Charges paid by the client to the company.
  • Historical and projections data like Factsheet.

Does SEBI approve any of the services offered by portfolio managers?
No. SEBI does not approve any of the services offered by the Portfolio Manager.

What are the tax implications of investments in PMS?
As per PMS, each transaction will be considered as an independent trade and capital gains will be applied on each depending upon whether the relevant stock was held long or short term. The Portfolio Manager ideally provides an audited statement of accounts at the end of the financial year to aid the investor in assessing his/her tax liabilities.

Can an NRI avail of Portfolio Management Service?
For NRI’s, have to open a PIS (Portfolio Investment Scheme) Account as required under RBI guidelines in order to invest in the PMS scheme.

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