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Key Takeaways:
According to Upstox, as of 2026, there are around 501 SEBI registered portfolio managers, with the PMS sector experiencing 17% CAGR growth over the last five years. Most investors are unaware of how portfolio management schemes differ from other investment products like mutual funds. The key point is that PMS invests in securities directly in the client's demat account. Mutual funds raise capital by issuing units.
The SIP route through a mutual fund allows the investor to begin investing from just ₹100. However, an investor in PMS needs to make an initial investment of no less than ₹50 lakhs. PMS caters to wealthy individuals and allows them to create a customised portfolio.
On the other hand, mutual funds are ideal for retail investors who require diversification and low cost. As estimated by Deloitte for India, the opportunity in wealth management market stands at USD 2.3 trillion by FY29.
The tax aspect is very important. If you consider a PMS scheme, each rebalance done by the portfolio manager will result in a capital gains tax incidence for the individual investor. On the contrary, taxes do not arise on your investment in a mutual fund till you actually sell out your units. High portfolio turnover in PMS can adversely affect the investors tax incidence.
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Mutual funds have an inherent advantage where transparency is a requirement for the investor. The returns are benchmarked in public domain, and an investor may compare the category, rolling, and expense ratio performance from the AMFI website. Such benchmarking of PMS performance is not as standardised as compared to mutual funds.
According to Anand Rathi PMS, PMS is ideal for those who prefer investing directly in stocks, have concentrated portfolio selections, and want to create customised plans for certain objectives. Also, one can get exposure to a maximum of 25% of investments in non-listed stocks through non-discretionary investment under SEBI regulations. In cases of bull runs, PMS can fetch unique returns with ₹1 crore investments or more.
Top 5 points in favour of using PMS:
(1) Focus on investing without diversification principles for mutual funds.
(2) Holding securities directly in demat form in the name of the investor.
(3) Personalised approach tailored towards specific requirements.
(4) The possibility of outperformance during selected market phases.
(5) Thematic strategy not offered by mutual funds.
Top 5 disadvantages of PMS:
(1) High costs, including those related to management and performance fees.
(2) Constant rebalancing resulting in taxes.
(3) Low liquidity with no assurance of redemption.
(4) Lack of uniform performance reporting.
(5) Specificity to the manager running the PMS account.
The total PMS industry in India crossed ₹41.56 lakh crore in AUM till January 2026 as per the data provided by SEBI. However, just because of its size, it cannot be called suitable for all types of investors. Investors who fall below the ₹50 lakh mark should still invest in the mutual fund products through SIP investments starting at ₹100. Higher than ₹50 lakh, the PMS investment product is ideal.
Which is better: Portfolio Management Services or mutual funds?
Neither of them can be termed as being better as both cater to varying requirements. Mutual funds suit most investors, especially because of their ease of use, diversification, and SIP facility. PMS would work well for HNIs who would like to customise their portfolios, make heavy investments in stocks, and hold securities directly.
Is the PMS a superior option compared to the mutual fund, and which would be more suitable for the current scenario?
The Portfolio Management Service is apt for wealthy individuals who seek an alpha through their investment decisions. It all depends upon your financial capacity and preferences.
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