Should You Manage Your Own Stocks Or Go On For PMS?


Multiplying and maximizing your hard-earned savings is obviously one of your major goals of life to secure the financial future for yourself and your loved ones. Let’s assume that you have suddenly inherited a decent size portfolio of shares from your father. However, let’s say you don’t know much about stocks and how the markets work, which worries you. Now, the big choice that you will need to make is to either let the portfolio remain as it is or assign it to an experienced portfolio manager. Let’s explore what could be better for you in the given circumstances.

The decision depends on whether you are inclined to understand the market and have the patience to absorb the knowledge, utilize it, and make your portfolio grow. That said, if you are worried, then you are better off opting for Portfolio Management Services (PMS) or mutual funds. PMS is very lightly regulated whereas mutual funds are heavily regulated. MFs come up with valuations every day. You will see the NAV, portfolio disclosure, and performance track record. The choice of PMS is much more difficult to make. You must understand that PMS involves giving your power of attorney to someone else to manage your investments on your behalf.

There is a significant tax difference when you invest in a mutual fund or when you opt for Portfolio Management Services in India. Let’s say you put Rs.25 lakhs that you inherited in PMS, the portfolio manager will buy and sell. Thus, any short-term gains accruing to you from that portfolio will attract taxes. When you invest money in a mutual fund and the portfolio manager of the MF buys and sells something, you will not be liable for the short-term capital gains tax nor is the MF. If you hold your MF for 1 year or more, gains will qualify as long-term capital gains. This is slightly better since in PMS every transaction will be subject to capital gains depending on the time held.

Thus, your financial objectives with the stock portfolio you have just inherited become crucial here. They will help you determine whether PMS will be better for you or MFs. Each has advantages of its own. The best thing to do is to consult an expert. PMS services in India are beginning to pick-up over the past decade. With lots of money remaining idle in Demat accounts of holders, the market for and scope for equity portfolio management is huge. However, whether PMS suits you or MF is a decision that will depend on many factors including your risk profile. You are best advised to consult an expert in this regard.

Location: Mumbai, Maharashtra, India

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