Hello guys,
I need some advice, If I choose a PMS or shall I stick to Mutual Funds, as I am not getting enough time for research/follow up to my stocks investment. my details situation is explain below.
I started invested in mutual fund in 2005 and then moved to investing in stocks later.
Currently my wife and I together have portfolio worth of around 50L
20L in Mutual Fund ( main ELSS or equity large cap)
30L in stock ( mainly midcap and few large cap) => now my portfolio is 20% down from its peak.
Together, We do have potential to add 5-6L every years to equity.
I have burn my hands in JPinfra IPO and MIC but still able to make decent returns. But not enough if I see how much time I have to put in.
Now a days, we are not getting enough time to focus on our stocks. So thinking of switching back fully to mutual Fund or a PMS service.
Below is the rational, I have put about mutual fund and PMS.
Mutual Fund:
I have some experience in investing Mutual Fund. Started investing since 2005 (reading/following valueresearchonline.com since 2005)
20% CAGR is achievable with decent efforts.
Expense (yearly charges) : 2.25 regular mode ( bought thru trading account)
: 1.25 direct mode ( bought directly from fund house)
Strategy:
Selecting 10 MF ( 3star -5 star rating from valueresearchonline.com )
a) 3 large cap equity MF
b) 3 mid cap equity MF
c) 2 small cap equity MF
d) 2 multi cap equity MF
Adding 6L yearly in all fund (divided equally) 5000 Rs SIP every month in each fund.
Review Mutual Fund return every year, and sell them if they are not performing for last 2 continuous years ( 5% less return than compare to their peers)
PMS
No experience: but heard/read on twitter that some of PMS are able to make 30% CAGR…
Need a minimum lump sum investment of 50L in a year. That means need to sell all existing investment and transfer to PMS.
I suppose they will deploy the whole 50L within a year.
i. Market is all time high, so a bit afraid, if invest 50L now, coming few year returns may not be good.
ii. My own wisdom say, not a good time to deploy 50L if you have only 50L.
Not sure how we can add more money to PMS say 5-6L a years.
Not sure what to do, if PMS is not performing to my expectation. Probably only option it to sell everything and choose another PMS ?
Looking for some advice, what shall I do… does anyone ( or their friends) have some experience with PMS services.
Please see Murphy’s law below. You might quit a fund and it will just start to perform. So generally we should avoid churning and always choose a good fund manager.
Hi Ashutosh, I am not sure, what do you mean… currently I want to understand if I shall choose PMS service or stick to my mutual fund strategy ( describe above)… or if someone have a different advice
#1 In a mutual fund, as long as you hold the units, there is no capital gains tax liability of any type even if the MF manager churns the portfolio. In a PMS however, stocks are held in your name and you are liable to pay long term or short term cap gains as the case may be.
#2 If you sell your MF after say 2 years, your tax liability is also deferred to the end of 2 year. In PMS however, you will have to pay tax earlier - specially with STCG which is paid 3 times in a year. Paying tax early will also hurt your returns.
#3 Reported return numbers will seem inflated in a PMS because PMS manager will not include tax in his return calculation while you will have to bear those very real and substantial tax expenses.
#4 Risk is higher in PMS. I am not talking about concentration of performance risk. I am talking about integrity risk - the case where your PMS manager is a fraud. PMS managers are loosely regulated and they can invest their personal money in market separately from the PMS. What if your PMS manager is selling the share in his personal account which he is buying for his PMS clients?
#5 The minimum ticket size is 25L but there are ones who don’t take less than 5 Cr. so not all are accessible for all of us.
#6 Lastly, there is no way to verify the return claims of PMS floating on twitter. And even if you could, many of them are in business for last 2-3 years which is not a long enough time frame. MFs have 20 years data available for them.
So are there any advantages of PMS?
Yes. The good thing about a (non fund house) PMS manager is if you have found a good one, you can stick with him for life. A mutual fund manager or manager of PMS run by a fund house may leave any time.
Mutual funds are better than PMS if capital invested in one fund is very high % of net worth. You can look at funds where the manager himself has put significant portion of his net worth. You can see that in scheme information.
What Ashutosh most probably means is that he wants to sell you something, which most likely you will not need.
Here are some inputs based on my experience. I believe the key to creating wealth is being disciplined (especially when things go bad) and invest for the long term. In that context, I don’t think the choice between PMS or Mutual Funds will make a difference. I have no experience with Mutual Funds and so will not comment on that, except the folowing. Most fund houses group run brokerages and that is risky for the investor in my opinion. Case in point - ICICI Securities IPO.
PMS Service makes sense only if you have atleast 50 lakhs to invest. I trust that the 50 lakhs that you have represents only part of your assets and you have enough liquid assets to take you through 5 years of living. It is important to choose the portfolio manager wisely. I know people who have invested with equinomics (G Chokkalingam) and they are quite happy [I dont because I dont have 50 lakhs ] . I follow his interviews and I believe he is very grounded and makes a lot of sense.
Another approach would be to follow stock letters. I follow the one by Moneylife (costs less than 3000 per letter) and their approach to stock picking is quite impressive. Here there is no constraint on how much you can invest. But if you do join such a stock letter, you need to give atleast 1-2 years for your portfolio returns to be in sync with theirs.
Note that none of these are recommendations, nor is there any guarantee that you will get an adequate return. My view is only on their approach - honest and consistent. The returns you get depends on a lot of external factors outside our control. Hence my insistence that it is more important to be disciplined and invest for the long term (this is in our control). You should make your own assessment and choose what best suits you.
Please think twice before putting false allegations towards others. If you want to make big in equities first of all have a positive mind.
I myself have taken 2 PMS service in my inital days and had a bad experience. Paid hefty exit loads and exited. Dont want others to make the same mistake but I cant post those details in a open public forum.
Attached my disclosure to the message sent to the person who message me.
Also a mf or pms or for that matter wealth management is different for different people and cannot be tailored the same for everyone. A general advice cannot be given to everyone and for specific advice the details of the person is required like time horizon, risk , return expectations among others and sharing personal details in an open public forum is not adviced Therefore DM.
Hi
I am having a PMS with a well known fund manager and here is what I have to say about that.
Started in July of 2015 with 25 L , and the cash was deployed in market the very next day into 10 stocks, the portfolio took a hit in the beginning itself and was down from 25 L to around 21 L, after that it started working well, in December 2017 it was up to 50 L ( so thats a very good number inside 3 years time), once the correction started in January it all went for a toss, the PF came down to almost 29 L , in a span of just 6 months from 50 L, Now it has almost completed 3 years and PF is at 31 L, now if you calculate the returns its just 8% hardly the returns of a FD. Almost many people who I have contacts have similar experiences returns range from 10-20% . So its not a wise step for you to take all the investable amount that you have of 50L and put in a PMS and expect them to grow it. As you yourself has written if you can make 20% with SIP in mutual funds , I dont think you even need a PMS. The key point is try to make your Capital high, say 1 Cr, so even a 15% Cagr will fetch you good profits, as the Capital grows its better to stick to realistic returns of 15% rather than running for 30% kind of returns.
This is my take with personal experience.
Key things to note , the PMS amount that i have invested is well under 10% of my total allocation in equities, so it wont effect me even if it didnt perform well. In your case its all you have in Equities so its a huge risk according to me.
Personal experiences in Mutual fund is limited as I have only PPFAS fund and its doing pretty well.
Now a days, we are not getting enough time to focus on our stocks. So thinking of switching back fully to mutual Fund or a PMS service.
This shouldnt be the case as after all you are working for your money to grow so find sometime to track and deploy cash otherwise its not gonna endup well in terms of returns.
@Hocuspocus32, Thanks Vivek for sharing your experience with PMS service. This is really helpful. As I always get this -ve feeling after seeing news headlines that PMS CAGR for last 10 years is xx% and that is way above my own CAGR, even after putting so much time… so why not PMS?
but now I know, it is not so rosy as it presenting/marketed
Thanks a lots!!
@Uservijay, thanks for this info, I did not know this, even I have been investing since so long in MF. will check my current MF holding and see, if I can find such info.
Thanks !!
@Shivramrca, Thanks shivram for your advice. I had subscription of moneylife letter in past (2014) ofcoruse I like their choice of stocks. but I somehow could not follow their approach of investing every month equal amount in all shares… because when i became member in 2014 most of share already made all time high. and my sense did not allow me to do that.
so really could not convert the gain in my portfolio as they claim in their advt. but in overall I like them better than others stock service I had in past.
but Yes this is another choice I have, instead of going MF or PMS… invest in stocks “moneylife way” ( equal amount in all stock every month)
@pkk123: thanks . your last point about “whole life sticking to a fund manager in PMS case” is really a valid point. I have observe that a MF returns hit when the fund manager changes. and we can not predict, if a new fund manager will bring a better/worst return for your investment.
My suggestion is to go for a good small and mid cap PMS given your size of funds, risk & return management is of PMS to look out.
Go with a experienced PMS manager with track record which matches your thought process. If you have any questions you can reach me.
I am personally invested in PMS and prefer it over MF
