Mutual funds vs PMS: Which one is better for whom. Details here

Mutual funds vs PMS: In a bid to beat average growth of inflation, equity investment is considered one of the best options for an investor. However, who can’t afford to invest in direct equities, mutual fund investment is the route they go for. But, in post-Covid scenario, a good number of investors have intensified investing in direct stock market. So, investors demand for Portfolio Management Service (PMS) has also increased. In such a situation, it become important for an investor to understand which one is better for them.

Mutual funds vs PMS comparison

Comparing mutual funds and PMS, Pankaj Mathpal, MD & CEO at Optima Money Managers said, “Both have the ability to beat average rate of inflation growth but for mutual funds, an investor don’t require demat account whereas for PMS, demat account is must. In mutual funds, an investor invests in a plan and fund managers invest in stock market charging the investor through expense ratio mentioned in the plan. But, in the case of PMS, an investor has to hire a fund manager, giving him or her power of attorney to invest in stock market on behalf of the investor.”

Pankaj Mathpal of Optima Money Mangers went on to add that in PMS, one needs a minimum of 50 lakh for investment. The investor has to pay all brokerage and taxes for buy and sell of stocks.

On how much charge one has to pay for PMS, Pankaj Mathpal said, “In mutual funds, fund manager charge an investor via expense ratio of the plan that varies from 0.50 per cent to around 2.50 per cent. In case of PMS, the fund manger providing the portfolio management service would charge around 2 to 2.5 per cent of the transaction value, which is applicable on both buy and sell of the stock (irrespective of gain or loss of the investor).”

Vinit Khandare, CEO & Founder said MyFundBazaar said, “Even though PMS offers more flexibility, mutual funds are tightly regulated and are more cost effective; they remain one of the most suited ways of taking passive exposure to capital markets. While there are a number of sub categories with equity oriented mutual funds, a diversified mutual fund amply diversifies across stocks & sectors providing a chance to generate benchmark beating returns by active management.”

Mutual funds vs PMS return

On how much return one can expect from PMS, Pankaj Mathpal said, “In long-term, an investor must expect 2 to 2.5 per cent more return from PMS in comparison to mutual funds as PMS is more expensive than mutual funds investment.”

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