As a first time investor in Portfolio Management Scheme (PMS) I had no idea how they worked and how to compare different PMS. Anyways, I zeroed in on one of the celebrity PMS fund manager with amazing long term track record.
The only info I had was last few years return and since inception CAGR returns the fund has generated and minimum amount to invest and this fund has gone through 2008 crisis so they know their shit well and can navigate through bad times.
My objective at the time was to invest for long term(10+ years) to achieve big corpus.
While researching online found below article which just hit the Nail in the coffin and connected with my thought process.
An investment in a good fund or PMS ought to be thought of as a generational investment, i.e something you do not ever touch (except add or pour excess savings into) and pass on to your children
You should doubt as much as you want on the fund manager before you take the plunge, after investing you should have complete faith in the fund manager and should stay invested through the course and maybe evaluate after 3 years which is good time frame I believe.
I Joined on 28-Apr-2017 with PMS managed by celebrity PMS fund manager. People have lot of notions/opinions about his style and how he operates but I believe there are more misconception than truth. So thought about writing my experience with the PMS on the short journey I had so far and how it has changed my outlook towards portfolio building.
Part 1:- How PMS operates from Individuals point of view:
1. Select the PMS
2. Complete the paperwork, I did this without going anywhere or meeting anyone in person. Paper came in courier and I signed it and sent back.
Docs Required – Aadhar Card, Pan Card, Nominee Aadhar card, Canceled cheque and couple of photos.
3. Once the accounts are opened(Demat), transfer the Money to PMS escrow account
4. Once the minimum amount is transferred, full amount is Invested the same Day
Yes was shocker for me that such a big amount was invested in 1 shot. For them it is small and they are confident of their picks at the price point.
5. You get report of the portfolio with latest valuations per stock each trading day at EOD. Its a SEBI requirement.
6. Each Individual can have different portfolio as per the time they entered the PMS
7. The Returns Published by PMS is average of all Folio and since inception figure is based on model portfolio
8. As an investor now you have to do nothing. Yes you have to do Nothing
9. All the dividends declared will be credited to your bank account
10. Each quarter fixed fee will be charged and at the end of financial year performance fee will be charged. Each fund has different fee structure.
My PMS charges me 2% Fixed p.a charged quarterly and 10% performance fee above 10% Hurdle rate, with high water mark.
The charges are taken care by selling small quantity of some stock.
11. Any tax liability has to borne by the investor from his pocket. All the fees, charges and STT can be adjusted against the profit
12. The Fund is audited by external agencies and one can believe in the numbers reported by large PMS.
13. PMS is not like advisory its more like private mutual fund, as the Portfolio is private but working is more like mutual fund.
Fund Manager buy and sells as per his discretion and will not think about tax optimization.
14. Investors can top up funds any time they want. PMS suggested to add 10% or more funds so that portfolio allocation is maintained.
15. Investors can either withdraw partial or full funds any time they want. In case of Partial withdrawal minimum investment amount should be adhered to
Part 2:- What I learned by Investing in PMS
Thanks for reading, Hope you liked the article, please leave your feedback in comments section. Will try to reply to all the comments.
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