Meaning of Portfolio Management Services

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Meaning of Portfolio Management Services (PMS) will assist the investors in managing their investment. Let’s discuss the meaning of Portfolio Management Services.

The main problem is that when a beginner steps into the stock market, he starts investing the stocks in bulk and thinks that buying more stocks will give him a good profit, but this will take the investor backward rather than provide them with a good profit. 

Also, read PMS Review to know about Portfolio Management Services Regulations SEBI, PMS Registration, and, PMS SEBI.

Investment can be a challenging process for beginners as it requires comprehensive knowledge regarding the market. Investors must be able to calculate the risk and the losses that can occur in the industry.  

Research is essential before putting a step forward in the stock market because all it takes is one wrong investment decision to make an investor come crashing to the ground.  

Looking into the investment of the clients, Portfolio managers are appointed for this position. Portfolio managers have to manage or meet customers’ investment goals.

It is the Portfolio Managers’ responsibility to give an investor the best investment programs according to their monetary strength and bring the best out of it.

An investor should have full faith in their fund manager; freedom must be provided to the manager to do things accordingly and should not restrict them. 

Within a suitable level of risk, the portfolio manager’s definite objective is to expand the venture and provide the investment’s expected return. 

Portfolio management requires the capacity to evaluate strengths and weaknesses, opportunities and threats over the full range of ventures. That is why you need Portfolio Management.

Let’s move forward to the types of portfolio Management Services. 

Types of Portfolio Management Services

This section will furnish you with the different types of Portfolio Management Services that come along with their own objectives.

  • Discretionary Portfolio Management
  • Non-Discretionary Portfolio Management
  • Active Portfolio Management
  • Passive Portfolio Management

Discretionary Portfolio Management

In this, the investor has to trust the fund manager. The investor just needs to provide the capital amount to the manager. The rest is decided by the portfolio manager. 

The portfolio manager takes all the decisions that perfectly suit the client’s investment policy. In the discretionary portfolio, the manager charges more than others as he needs to put more effort into achieving the goals.

Non-Discretionary Portfolio Management

In this, the portfolio manager’s role is to give beneficial advice to an investor. He will take all the input from your side and make a plan to gain profit.

He makes a map or a path for the investor by providing him all the instructions regarding risk, hurdles, benefits, and drawbacks. 

After the whole discussion has taken place between the manager and the investor, now that the investor knows reality, the final decision is solely taken by the investor. 

When the investor gives the green signal, then the manager role comes in the picture; he then works on behalf of an investor. 

Active Portfolio Management

The portfolio manager has to be present all the time whenever the investor is in need of him. The procedure where the manager makes explicit speculations with the objective of outflanking a venture benchmark or target return.

The higher the returns, the higher the risk will be involved; rather than investing the whole amount in one sector, the portfolio manager attempts to reduce the risk by expanding investments in different sectors. 

Passive Portfolio Management

This is totally opposite to Active Portfolio Management. The main plan is to get the same return, as shown in the index. It is also known as Index management. 

The method implemented by the investor or portfolio managers is much of an informal approach. They set a benchmark index as to where they want to reach and perform accordingly.

The objective is to create a good amount of return on investment according to the selected benchmark. 

Portfolio managers usually experiment with Index finances, which has comparatively lower turnover and sensibly decent long term returns.

Let’s see some objectives of Portfolio Management Services and have a brief discussion. 


Portfolio Management Services Objectives

The portfolio management services target is to boost returns over the long term by putting resources into popular securities, for example, equity, debt, cash, commodity, and so on. 

With the help of proper diversification, PMS helps the client decrease the risk and accomplish the customer’s objectives. 

Here are the objectives of the Portfolio management services.

Security of principle investment: The most important Feature of PMS is to minimize the risk.

The main motive of the amount invested initially is to keep the invested capital safe. 

The return on investment should not be lower than the amount invested. If the return is less than the investment, then it means that an investor has incurred losses. If the return is a higher then investment, then yes, it is a profitable investment. 

Capital growth: The first thing that came in our mind after listening to the term Capital growth is that something is related to money and development. The portfolio manager is required to increase the return for an investor’s investment.

The return on investment must increase as per the capital being invested. Then it will be beneficial for the investor to hire a portfolio manager.

Portfolio Diversification: Investing in different types of securities available in the industry are designed intentionally in a way so that portfolio managers can reduce the risk of loss on the amount invested. 

The capital is invested in different industry sectors to divide and lower the risk factor that can lead investors to losses. 

Consistent Returns: To trade consistently is the key factor to get consistent returns on the amount invested. The regular return on investment is essential to satisfy the goals of the investors. 

If the capital invested is giving regular returns, it will prove to be profitable for the investor and help him in achieving his goals earlier than planned.

Also, read How to Create Portfolio Like Warren Buffett? and reap the portfolio management benefit.


Conclusion

The portfolio manager offers PMS. The manager is responsible for bringing a return on investment, invested by the customer.

Investors invest the money to fulfill their financial goals, but before investing, it is necessary to do all the research that will be beneficial for him. 

An investor must take advice from some knowledgeable person that can help them and can guide them to the path of success. 

People hire a portfolio manager, give an idea about their plans, and then the Portfolio manager’s role starts. 

There are four different types of Portfolio management services, such as Discretionary Portfolio Management, Non-Discretionary Portfolio Management, Active Portfolio Management, Passive Portfolio Management.

Each one of them is important and unique in their own ways. 

We hope this article has helped you to gain more knowledge regarding the Meaning of Portfolio Management services. 


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