Why PMS

Why and how Portfolio Management Schemes give you an edge?

World of Investment Opportunities

The difference between successful people and really successful people is that really successful people say no to almost everything Warren Buffett

Above quote explains how PMS and AlFs are different from Mutual funds. PMSs focusses on a few selected companies and says no to the rest, whereas Mutual funds are made to follow too diversified approach because these are products meant for masses. Though, this helps mutual funds in reducing volatility to an extent, but more doesn’t always mean low risk, and in fact exposure to more companies may increase the risk of buying less known. Also, high diversification beyond a point comes at a cost of limiting potential long term performance as in general, most mutual funds hold 40 -70 stocks making it no different than an index.

Concentrated, and Focussed

PMS strategy is meant to invest in concentrated basket of 15-25 well researched companies. Such focused approach generates superior long term performance and is meant for sophisticated and informed investors who really want money to work harder for them and are focused on long term performance and, not bothered by short to medium term volatility.

Own businesses, and not units

PMS strategy gives access to direct shareholding in the businesses, making it a more direct method of investing. When one invest in companies, it opens the door to not only grows with the rise in corporate earnings and dividends, but also the growth of investors own intellectual capital. As here investor clearly gets to know what’s happening in the portfolio. In the long term, growth in all three matters and adds up.

You own your own portfolio

PMS strategy works on the concept of personal demat holding and with common research, and not a pooled stock portfolio across investors. With the rising participation of young and retail investors in mutual funds, pooled stock portfolio concept is prone impulsive and behavioural flows which rise with rising markets and peak out at higher valuations, and fall with falling markets and bottom out at attractive valuations. In PMS, one investor’s behavioural reactions to market movements doesn’t impact other investor’s portfolios.

Buy and hold, with low churn

Since PMS works with a concentrated approach, there is no compulsion to churn a stock that is performing irrespective of its rising weight in the portfolio over years. What matters is the expected earnings and growth potential in the businesses held. Unlike this, in mutual funds, beyond a point, at times fund manager may be forced to let go of a performing stock to cut its rising weight, given the regulations.

The safest and most potentially profitable thing is to buy something when no one likes it Howard Marks

The future is never clear; you pay a very heavy price in the stock market for a cheery consensus. Uncertainty is actually a friend of the buyer of long-term values Warren Buffett

Don’t Just Invest. Make an Informed Decision.