Making multiple investments and investing in multiple assets does help to diversify your portfolio. But are all investments good? You need a financial strategy that matches your objectives to your investments. That is where portfolio management services come into this picture. So, what is portfolio management services for your portfolio?
PMS Investment Meaning
Portfolio management services (PMS) are tailor-made for the investors. This means that your PMS will keep your financial goals in mind and suggest investment advice and opportunities accordingly.
Your portfolio managers help you to allocate the funds in the right proportions. This might be in stocks or bonds, equity or income funds or government securities. You can also create a portfolio with the right mix of all the above. This shows “What is portfolio management services?”.
It allows you to arrange and diversify your investments across multiple assets. You can invest in various opportunities to “diversify” your portfolio. It reduces the risk and also ensures that you enjoy multiple returns on investments from multiple assets.
What is Portfolio Management Services Types
What if you could control all aspects of your portfolio? That is exactly what Discretionary PMS allows. With this type of service, you have control over the portfolio. You can take all associated decisions.
The portfolio managers will devise an effective strategy as per your requirements. The managers have the authority to make investment decisions even without your (investor’s) approval. So, what is portfolio management services that are non-discretionary, let’s see.
Non-discretionary portfolio management services are the exact opposite of discretionary in their concept. Here the portfolio managers can only make suggestions when it comes to investments.
The final call on which assets to invest is yours or the investor’s. The manager can only give you financial advice and suggestions and cannot make any investment decisions of their own accord. What is portfolio management services when it comes to different management styles? Let’s see below.
Active Portfolio Management
The active portfolio management services have one main objective- to achieve maximum returns. So what portfolio management services will do to your investments? This type of portfolio management will distribute your assets across multiple asset classes or stocks that are uncorrelated or negatively correlated.
The asset manager can use this type of approach to try and lower any possible risks. An active portfolio manager will consistently monitor to ensure that your portfolio remains aligned with market opportunities.
What are portfolio management services that do not bring in a sizable turnover? Thankfully, this type results in a larger turnover compared to the passive method. It also enables the portfolio to tap into opportunities that may have been otherwise missed due to passive management. However, it is important to note that active portfolio management often entails a moderate to high-risk profile.
Passive Portfolio Management
The key element of portfolio management for the passive type is fixed portfolio distribution. Such distribution aligns with the prevailing market trend. The portfolio manager will have enough equipment to weather turbulent times in the market.
For instance, if your investment manager chooses to invest in index funds since they increase over tenure passively and with no management. The portfolio manager will rarely intervene.
So, what is portfolio management services without any intervention? You get to choose what assets to invest and make all trade calls. You inform your portfolio managers who will move your funds as per your request. The turnover rate is low in this case. However, over the long haul, they do provide attractive returns.
Knowing all the characteristics, let’s see the benefits of portfolio management services. Below are a few reasons why you should sign up for portfolio management services.
Significance of Portfolio Management Services in 8 Ways
Insufficient market knowledge can undermine the quality of a portfolio, despite a substantial investment. Examining stock indexes such as Nifty reveals that individual investors often prioritise price over value, resulting in lower-quality stocks and a smaller share of holdings. Seeking expert assistance, such as Portfolio Management Services (PMS), is crucial for constructing a high-quality portfolio.
As you invest through portfolio management services, it connects your portfolio to SEBI-registered analysts. These experts closely monitor an investor’s portfolio, indulge in rigorous market research, keep track of your profile and only make investments when there are proper and favourable market conditions.
Unlike mutual funds, PMS investments do not fluctuate due to the behaviour of hundreds and thousands of investors. Here buying or selling of assets is solely at the discretion of the investor’s decisions. It of course depends on the type of PMS the investors choose. So, what is portfolio management services do when there is a financial risk? Find out below.
Protected By Financial Risk Management Plan
PMS investment has a robust financial risk management plan, it reduces the risk and increases returns during volatile market situations. Such a plan keeps track of diversification, market and interest rates, inflation, and other essential factors.
Tailor-Made Investment Portfolio
By investing in PMS, investors can have a customised portfolio. This investment vehicle allows the individuals to decide or discuss with the fund manager regarding which securities or stocks to choose or avoid. Through this, they can ensure a desired portfolio.
Transparent Fee Structure and Data Management
So, what does the portfolio management services concept say about the fee structure? PMS investment comes with a transparent fee structure (legally agreed fee structure). The investors have access to a detailed fee structure that lists all the charges and expenses of their portfolio. Moreover, you can tailor the expense ratio depending on ticket size and a performance-based fee structure.
Investors can also have access to each detail regarding their portfolio, and trading and have access at their fingertips. Hence, this investment offers the utmost transparency of portfolio information.
Efficient Risk Management Strategies
A portfolio manager’s main goal is to help you makе morе monеy with lеss risk in your invеstmеnts. Thеy work on sprеading thе risk, so if thе markеt changеs, you don’t losе a lot of monеy. Thеy try to find thе bеst opportunitiеs that match your invеstmеnt plan. Thеy also watches out for big risks in thе markеt and adjust your portfolio to makе surе it doesn’t lose too much value during tough times.
Pеriodic Rеviеw and Monitoring of Your Portfolio
What is portfolio managеmеnt sеrvicеs concеpt in tеrms of pеrformancе? A portfolio manager keeps a close eye on how each investment is doing and the rеturns it brings in rеgularly. Your investment is adjusted to match thе currеnt markеt trеnds, making sure it stays on track to mееt your financial goals and gеt thе bеst possiblе rеturns. Aftеr you’vе invеstеd, it’s important to regularly check and еvaluatе how well thе portfolio management sеrvicе is performing by reviewing thе disclosеd information.
FAQs: Decoding What is Portfolio Management Services
How does PMS align with sustainable investment goals?
PMS integrates environmental, social, and governance criteria, aligning with sustainable goals by promoting responsible investments.
Can individuals or small investors participate in renewable energy PMS?
Yes, small investors can participate in renewable energy PMS, fostering inclusivity in sustainable finance.
What role do technology and innovation play in managing renewable portfolios?
Technology and innovation enhance efficiency and risk management in renewable portfolios, driving sustainable advancements.
How is the performance of a renewable energy portfolio measured?
Performance in renewable energy portfolios is assessed through metrics like energy output, emissions reduction, and financial returns.
Are there tax incentives or benefits associated with investing in renewable energy portfolios?
Investing in renewable portfolios often comes with tax incentives and benefits, encouraging sustainable choices and fostering environmental responsibility.
In conclusion, effective portfolio management is crucial for aligning investments with financial goals. Portfolio Management Services (PMS) offer tailored solutions, allowing investors to diversify, control, and customise their portfolios.
The types, whether discretionary or non-discretionary, active or passive, cater to diverse preferences and risk profiles. Understanding what is portfolio management services allows you to reap the benefits like expert insights, maximum returns, risk management, and transparency, ensuring efficient portfolio performance. With Sustvest you can explore investment opportunities in renewable energy and build a diverse portfolio.
Founder of Sustvest
Hardik completed his B.Tech from BITS Pilani. Keeping the current global scenario, the growth of renewable energy in mind, and people looking for investment opportunities in mind he founded SustVest ( formerly, Solar Grid X ) in 2018. This venture led him to achieve the ‘Emerging Fintech Talent of the Year in MENA region ‘ in October 2019.