Understanding the Basics of Portfolio Management Services in India

by Raghav M. Marketing

Professional portfolio management is an excellent service for investors planning to invest in a basket of mutual funds, stocks, and other products. The investment is managed by professional portfolio managers to offer enhanced convenience to the investors. The services are usually tailored to meet the specific investment and financial objectives of the investors.

Increasing number of investors, especially NRIs and HNIs now prefer such services over handling their portfolio on their own. If you are looking for such services too, these are some important things that you should know-

1. What are the different types of portfolio management in India?

In India, portfolio management is divided into two categories- discretionary and non-discretionary. With discretionary services, you cannot interfere in how your investment is being managed. In non-discretionary services, the portfolio managers job is only to suggest investment ideas to the investor, and then it is up to the investor whether he’d like to invest or not.

 However, if you do want to go ahead with the suggestion of the manager, the manager would execute the investment.

2. How do these services work?

The services are custom designed for every investor as per their investment and objective. The service providers have a model portfolio for the investors, and it is based on this model portfolio that all the investments are made.

However, this portfolio can be different for different investors due to the time of an investor entering the market, investment amount, objective, and market scenario.

3. What are the charges of portfolio management?

These services are offered in the form of schemes where investments are made in multiple assets like stocks, mutual funds, etc. There are also a few charges associated with such schemes. They generally include an entry load and management fee. Apart from this, there can be audit charges, custodian fee, transaction brokerage, and charges for opening a demat account.

Also, some of the companies work on a profit-sharing basis where the investor has to share some amount of the profits with the service provider. Make sure that you check the charges of the company before selecting.

4. How are these investments taxed?

All the income generated through portfolio management is considered as business income. As the service is named as an additional investor on your behalf, the tax treatment is similar to individual investors. As a result, all the profits are taxed slab wise.

The service providers send an audited statement to the investor every year and then it is up to the investor and his chartered accountant to treat the profits as business income or capital gains.

5. Is portfolio management similar to mutual funds?

While portfolio management services are treated as investment schemes and both are managed funds, there are a few significant differences between the two. For instance, portfolio management involves concentrated portfolio, and the portfolio is designed to meet the specific needs of the investor.

Moreover, it is not the fund house but the investor who is the direct owner of the stocks. Even the tax treatment is different.

Portfolio management can be beneficial for investors looking to have a more involved relationship with a fund manager as compared to investing in mutual funds. As the investment is professionally managed, your investment gets the best opportunity to grow and achieve your financial objectives.

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Created on Jun 13th 2018 05:17. Viewed 792 times.

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