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What is the Mutual Funds? What is the Portfolio Management
Services (PMS)? What is the difference between Mutual funds
and Portfolio Management services? Give me detail
explanation??
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Answer Posted / sonu
A mutual fund is a collective pool where money is obtained from a large number of persons and invested by professionals. The fundamental difference between mutual fund and portfolio management service is that the latter involves management and implementation of your decisions.
Unless you specifically ask for the same, the PMS is not going to take investment decisions for you. On the other hand, you cannot instruct your mutual fund house manager to invest your money in specific sectors only, However, once the choices been taken, you lose all freedom of indicating your personal choice.
Another significant difference between portfolio management service and mutual funds is that the former can offer customized and individually tailored solutions. On the other hand, mutual funds offer group solutions for a large number of persons seeking a specific investment option. For example, if you wish to invest in the infrastructure sector and if you wish to spread your investment over a wide range of services, you can go in for an infrastructure related mutual fund. If you feel the existing mutual fund schemes are not good enough, there is nothing you can do about it.
When you take the same decision with the help of your portfolio management service, you can choose how much money goes into which industry and how it should be managed and assessed. The management service merely acts as an agent to facilitate and execute your decisions.
Another significant difference between the two solutions or services is the extent of regulation. Mutual funds have been very popular for the past five decades or more. Hence, there is well established set of regulations for mutual funds in the country. On the other hand, the idea of appointing a professional to manage one’s investment is a recent entrant.
The charges of different mutual fund companies and schemes have been laid out in clear detail. On the other hand, PM Services offered by banks and other financial institutions have their own separate and independent set of charges.
Under certain conditions and circumstances, the portfolio management service may function just like a mutual fund. If your portfolio is not very high, your bank may combine it with portfolio of other customers in the same condition and take joint investment decisions. When this happens, the service provider will function just like a mutual fund manager. However, if you have a diverse portfolio and if you are a high net worth individual, you can insist on customized services from your bank or financial institution. This option is not available when you invest in mutual funds.
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