Within equity investing, is PMS an opportunity attractive enough to bare the high volatility of concentrated investments? Curious to know your stance on the same!
I am investor in atleast 10 PMS schemes myself. My realisation in last 3 yrs is that none of the fund managers have been able to meet Nifty performance. And despite that I got charged high fees structure. So if you have to select PMS, you should select one which has fees structure on alpha returns rather than fixed fees.
That being said, I personally feel that for retail investors either ETF or large cap funds are right bet
Not sure how you classify investments as concentrated? It’s generally said to be fool hardy to invest in more than x no. of scrips if you do? And this x has been around 10-20 for most savvy investors. In my personal experience retail investors tend to hold more scrips and have minimal discipline on a structured portfolio.
@Jiten is bang on about fund managers.
Unfortunately, the Indian Financial Services industry hasnt reached a mature state and a lot of companies are money minded and they keep their own interest ahead of their clients. Better to invest in an index fund for 10 years rather than these PMS! The more they churn the more they earn and the investor loses.
Then how come every PMS boasts returns worth 25% or something on their websites.
the_losers_game.pdf (52.0 KB) One should read this
I believe on average direct mutual fund beats PMS any day.
And Mutual funds are good for investment in the small-cap category. Many fund managers in India have been able to beat the small-cap index and also being a high volatile category, diversification helps. Though the category has not given great return in the past 3 years that’s the feature of the category being highly volatile and high return. Good only for 7-10 years perspective as you never know when you may end up in a situation like what happened post-2017.
For large-cap, direct index funds are the best. You need to pay just 0.1% fee and you can get the diversification benefits. Especially when top companies are performing like Reliance, Hdfc bank, it becomes very tough for any mutual fund to beat the index. No need to pay a higher fee for an actively managed large-cap fund.
@Jiten would you consider Purnartha a firm that successfully generates alpha(they report cagr in the high 30s%. They do have plans per the alpha generated.
I would consider if fees structure is based on alpha returns only
I don’t have funds to invest with PMS given high ticket size(true for most), I think one can make decent returns in stock markets by avoiding losers.
Avoid companies that are high on debt and low on profitability. One bad cycle, and company goes bust.
Investor can a do a lot better if they use screener and use companies that have shown below for 10 years
15% Rev Growth
15% PAT growth
- < 0.5 Debt to equity
- Market cap > 7,000 crores
Note - 2020 was an aberration, so need to discount for that when using screeners.
Corp governance is very important in India but then it’s not possible to dig that deep for avg investor. Above rule should give decent returns