PMS Strategies

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Portfolio Management Services or PMS is a quite profitable investment however it isn’t free of risks. Investors need to go about their business with caution and employ PMS strategies to get higher returns and minimize risks.

PMS is a type of financial service availed by HNI investors to invest in financial instruments. It is a great investment opportunity for investors that don’t have ample time and expertise to invest.

As per SEBI regulations, the minimum investment in PMS is capped at Rs 50 Lakh.

Considering such a huge investment amount, an investor reaches out to PMS companies to get their portfolios managed by professional portfolio managers with years of experience in the investment world. 

Know about How Does a PMS House Function?

That being said, no amount of experience can guarantee 100% success in the investment world, so the PMS service providers employ PMS strategies to suit an investor’s objectives. 

Also, read How Can An Investor Invest In Portfolio Management Services?

If you have a doubt about Is PMS A Good Investment? then these strategies are what decide how much profit an investor can make. 

Portfolio Management Strategies

Portfolio Management strategies are the approaches employed by a portfolio management company to help investors register maximum profits with low risks. 

The return on investment depends entirely on the type of strategies for portfolio management that a Portfolio Management company uses. 

In total, there are 2 types of Portfolio Management strategies

  1. Active Portfolio Management Strategy – This strategy sees the active involvement of a portfolio manager who follows a dynamic approach to make things happen. 

In this portfolio management strategy, the portfolio manager identifies under-priced securities that have the potential to grow in value over time and/or short sell the securities whole prices may fall in the future. 

Further, there are 2 styles of stock selection that a portfolio manager can use:

  • Top-Down Approach – Here, the portfolio managers determine the market conditions and then make share market predictions overstocks that can perform well under the current market trends. The fund managers take help from technical indicators to draw better predictions.
  • Bottom-Up Approach – In the Bottom-up approach the investor focuses on an individual stock of a company rather than the whole market. 

Portfolio managers do not follow any market trends and simply pin their hopes on a well performing company. They analyze the individual company and not the market it operates in. 

    2. Passive Portfolio Management Strategies – Using Passive Portfolio Management strategies the investors aim at minimizing the PMS investment risk. The investors play safe and make low investments from time to time, rather than going big in one go. 

The investments don’t involve any sort of performance predictions of a stock. The investors let the market take shape and then invest in small proportions.

The investors going for this strategy of Portfolio Management usually employ the below mentioned stock selection styles : 

  • Conservative Portfolio – The basis of this stock selection strategy involves the investors to invest in less risky stocks. Less risky stocks can generally mean the stocks of well-established companies. 

Investing in less risky stocks although offers minimal returns but safeguards an investor from incurring losses. 

  • Index Investing – Index investing is probably one of the most widely accepted passive investment strategies. This strategy suits an investor who would like to invest in diverse stocks with minimal risk. 

Here, a replica portfolio of stocks is made by picking the stocks listed on an index. This is considered to be one of the safest methods of investing because a standard index has diverse stocks based on performance. 


Conclusion 

More and more investors are slowly opening up to Portfolio Management Services because of their lower risk nature. 

The portfolios managed by professional fund managers are a novice investor’s best bet against losses. The portfolio managers work to earn maximum profits for their clients by taking the aid of various PMS strategies.

The strategies are employed by the portfolio manager depending upon the investor’s goals and risk appetite. 

Active PMS strategies will suit an aggressive investor who wants huge returns on investment. Whereas the Passive PMS strategy will suit a cautious investor who prioritizes low risk. The downside of which is the low returns.

Still, investors are taken care of in terms of options.

In case you are looking to use Portfolio Management Services, let us assist you in taking the next steps forward. Just fill in some basic details in the form below:

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