Portfolio Management Service (PMS)
Objectives Of Portfolio Management Services
Now that we have understood the concept of Portfolio Management Services let us now learn the objectives behind it.
(i) Growth of Capital- This is one of the most important responsibilities of a portfolio manager. A portfolio manager continuously looks for the most effective investment chance that appreciates the capital of the client.·
(ii) Risk diversification- Diversification of portfolio helps in meeting the goals of the investor by maintaining a healthy risk-return ratio. It can happen in the following three ways-
A. Debt vs. Equity- While equities are known for high risk and high-income potential, debt instruments have the ability to lower the risk of a portfolio and add liquidity.
B. Domestic vs. International- A portfolio manager seeks to diversify risk by evaluating investment opportunities in domestic and international markets. This helps the client diversify risk between varied economies.
C. Tax Planning- There are various tax liabilities that an investor should adhere to while investing. Moreover, multiple tax provisions can help investors decrease their tax liability. Professionals managing your portfolio make sure that all of your investments fall in with the tax implications while helping you in saving tax wherever possible.
D. Rebalancing portfolio- This implies reverting to the earlier mix of securities after the fluctuations or movements in the market tilt the balance towards a specific form of security. This is generally done annually.
Next, we will discuss some of the advantages and disadvantages of PMS.