Everyone wants to secure their future. And to do this, there are many people who deposit money in the bank and some invest in FDs, mutual funds. In today’s will discuss some of the things that are important for you. When choosing between Mutual Funds (MF) and Portfolio Management Services (PMS), it is important to understand the costs and potential risks. Both investment instruments offer different benefits, but the right choice depends on your investment goals, risk appetite, and financial capacity. Let’s give you some information to help you decide.
Minimal Investment
Mutual funds generally start investing from ₹ 500. In contrast, the minimum investment in PMS often starts at ₹50 lakh.
Investment Structure
The structure of the two investment options is also quite different. In mutual funds, your money pools with other investors to form a shared portfolio.
On the other hand, in PMS, investors have their own Demat account, where the securities purchased by the fund manager are owned directly by them.
Risk and Returns
Risk and return also differ between the two. Mutual funds usually have lower risk, as they are more diversified, and the returns depend on the type of fund and its strategy. However, PMS is known for higher risk, with more focused investment and active management, which offers the potential for higher returns.
Cost
The cost structure of mutual funds is another important difference. MFs typically carry an expense ratio of between 1% and 2.25% for equity funds, making them more cost-efficient. Managed funds like ETFs have an even lower cost.
Liquidity
Mutual funds offer high liquidity, as investors can buy or sell units at any time. PMS, on the other hand, often comes with less liquidity, as the exit terms are defined by the PMS contract, which may include a lock-in period or exit fees.
Transparency.
Both mutual funds and PMS are regulated by SEBI, but mutual funds are required to disclose daily NAV, portfolio holdings, and annual reports, which provides a high level of transparency. The PMS, despite being regulated by SEBI, provides less frequent disclosures, but investors usually receive monthly reports with updates on their portfolios.
Which is better?
When choosing between mutual funds and PMS, it is essential to consider factors such as investment, risk appetite, availability of capital, and the level of customization required. Mutual funds are suitable for both short-term and long-term goals, while PMS is generally better suited for the long term. Investors who have a high risk tolerance capacity and a sufficient capital base may find PMS a more suitable option, while those who are looking for more affordable, diversified options may prefer mutual funds.
