Portfolio Management Services
PMS or Portfolio Management Service is a professional service where qualified and experienced portfolio managers backed by a research team manage equity portfolios on behalf of clients instead of clients managing it themselves. India being one of the oldest stock market ecosystems,the direct equity investing cult has been prevalent for decades and has especially taken deeper root since many marquee listings in the markets since late 1970s. There are a large number of investors who own equity portfolios in their demat accounts that they manage based either on their own experiences or with inputs from broking companies and equity advisors.
There are over 2.6 crore demat accounts and some of the largest listed companies have about 20 to 30 lakh shareholders each. While brokers provide equity research, advisory services and an operational platform; this usually needs the investors' involvement in investment discretion as well as operational aspects. More importantly, the onus of outcomes is shared between investors as well as the service providers. On the other hand, professionally managed portfolios make the portfolio manager answerable to the investor. They are managed for a fee and everything including, research, investing, operations, etc. are available to the investor.
PMS could either be Discretionary; i.e. where the fund manager takes decisions on investors' behalf or Non-Discretionary; i.e. where the fund manager needs to take approvals from the investors on suggested investments. The other alternative for professionally managed investments into equities is through Mutual Funds; which is a very popular choice too. Discretionary PMS differ from Equity Mutual Funds in following aspects:
Investors in Mutual Funds are allotted units that represent their holding in a basket of stocks. For every PMS investor, the portfolio manager creates an aggregated demat account where his portfolio is held on his behalf. The portfolio manager has to be provided with a power of attorney to transfer stocks in and out of the demat account.
Mutual Funds have investment thresholds as low as Rs. 500/- or Rs. 1,000/- while for PMS, regulation requires that such services be offered only to investors bringing in a minimum of Rs. 25 lakhs by way of stocks or cash. Subsequent investments (top-up), typically have a threshold of Rs. 1 lakh.
However, there are certain aspects where PMS could be seen to be having distinct advantages for long term buy and hold investors as compared to investing by self or investing via Mutual Funds.
Advantages of Investing in Portfolio Management Services
I. Focused Portfolio
People who manage their own portfolios on an average buy less of quality and focus more on price, rather than value
Data shows that while there are thousands of listed companies; individual investors (Non Promoter Non Institutional [NPNI]) have a lower share of holding in the larger indices like Nifty, BSE 200 or even Nifty 500. Retail or NPNI holding is higher in non-index smaller companies. There is askew to lesser quality stocks in their portfolios. It is equally remarkable that Nifty accounts for almost 60% of total market cap, BSE 200 accounts of nearly 85% of market cap and Nifty 500 accounts for nearly 94% of market cap (Source: Capitaline). This means that while the bulk of the market value resides with the top 500 companies, retail direct investors' holding is with the ‘long tail’ which doesn't hold much value. Retail investors consistently seem to ignore the adage, “Price is what you pay; Value is what you get”. They seem to chase stocks that are attractive on price and may or may not be so on value. It's not that retail investors never buy good quality stocks; it's just that they have a tendency to sell when they make a profit and hold on to stocks that have depreciated in value. It's a well-known fact that profits are booked easily and mostly prematurely, but losses are allowed to run. Knowledge First Wealth AMC promotes 'BUY RIGHT : SIT TIGHT' having realized that when people buy right they book profits and when they buy wrong they become long term investors. A simple test to measure the quality and performance of a portfolio can be done by visiting :www.knowledgefirstwealth.com
II. Independent Portfolio
PMS Holdings are isolated and hence not impacted by other investors behavior.
Mutual Funds being managed and held as a pool may be at times exposed to vagaries of the sum total behavior of hundreds of thousands of investors. In general, investors tend to invest in rising markets or improving fund performance and there could be times of panic in rapidly falling markets and times of poor fund performance. It may happen that mutual funds at times are forced to buy in rising markets and sell in falling markets because fund managers have discretion on stock picks but not on fund flows. Apart from managing the portfolio, managing fund flows is a significant activity on a daily basis. As far as PMS is concerned, every investor influences his own buying or selling time and price, there is no impact on other investors' holding or experiences. PMS has isolated individual holdings so one investor's behavior doesn't impact other investors investments.
At the same time, it is worth noting that Mutual Funds get benefited by regular inflows by way of Systematic Investment Plan, which helps them buy stocks in all kinds of market conditions. On the other hand, PMS would get inflows depending upon client discretion and their preferences. It is possible to register a SIP with Knowledge First Wealth PMS too, but these PMS-SIP flows will benefit individual client accounts and not comparable with enabling a fund to buy in general, consistently on a monthly basis.
III. Online Top Up
Mini PMS facility
Registering SIP in Knowledge First Wealth PMS is an interesting experience because our portfolios have very low churn. As an investor when one registers PMS-SIP more often than not, one knows the curated focused list of high quality stocks that one will end up buying month on month. Also, one can register a paperless and user-friendly PMS-SIP, online. Similarly, Knowledge First Wealth PMS also enables an investor to purchase additional amounts into the PMS portfolio online on a same day basis. Ideal for the day when some global event not connected with our markets results in a 1000 point correction on the Sensex, only to bounce back in a few days!!!
IV. Transparent Holdings
PMS is transparent
If we were to use cricket parlance, one can say that in PMS an investor can get a ball by ball update on the portfolio. Every trade is intimated to the investor and a live portfolio view is available on the managers' website.Specifically for Knowledge First Wealth PMS portfolios, there is a focused portfolio of curated stocks which the client can view in his holdings. Mutual Funds typically tend to have large diffused portfolios ranging from 25, 30 to even 100 stocks, (which restrict the transparency) and the holdings are made available only once in a month or a quarter. And for investors holding 5/6/7 different funds in their portfolios, they end up holding over 250-300 stocks. Even if they de-duplicate the holdings through proper analysis, they would realize they pretty much own whatever of the market there is to own, resulting in dilution of returns. You can't beat the market if you buy the market.
V. Superior Returns
PMS can be more aggressive and has the potential to generate higher returns.
Mutual Funds being structured for a wide mass of retail investors tend to be regulated strictly; for instance there are regulatory norms for benchmarking, scrip level exposure, investment patterns etc. More specifically in Mutual Funds, no stock can be over 10% of portfolio exposure. In PMS for instance; if a stock has 8% exposure and all things being static, this stock appreciates to become 12% of the portfolio, there is no compulsion to sell. There are times when a stock classified as mid cap appreciates over time and comes within the large cap basket. In a Mutual Fund scheme depending on investment universe defined the portfolio manager might be forced to sell. In a PMS, a portfolio manager may choose to have higher exposure as well as hold on to concentrated positions as long as they are delivering growth. While this can cut both ways, the ability to run concentrated positions combined with no inflows and outflows or compulsions of fund flow management, does afford the potential to generate higher returns.
VI. Transparent Expense Ratio
PMS is flexible in terms of expense ratios being transparent and customized
Expense ratio disclosures of PMS are transparent as each client signs a specific fee structure and receives a monthly detail of charge levied on the portfolio. Further, expense structures can be customized based on ticket size and profit sharing based fee structures are possible too.
VI. Focused Customer
PMS helps focus on the mass affluent and affluent customer
While Mutual Funds can focus on the new to market and lower sized segments through SIPs etc; PMS by definition, focuses on the mass affluent and affluent. This audience in India is growing by leaps and bounds, values flexibility and most importantly they are familiar with equity investing. The number of equity investors is almost 3 times the number of Mutual Fund investors. Significant wealth creation in the last decade has anyway occurred by way of sweat equity. It is then easy to diversify the holdings by investing in PMS. Hence, while there is a market for Mutual Fund investors, there also exists a market for PMS products
Our experience at Knowledge First Wealth brings out that PMS ageing is almost 1.5 to 2 times higher than Mutual Funds. This longer investing period means higher chances of returns, especially if you 'Buy Right' and 'Sit Tight'. A WIN-WIN-WIN situation for investor-manufacturer-investment advisor
In general, if PMS is offered to experienced direct equity investors who have a higher risk appetite and Mutual Funds are offered to investors who are risk averse or at early stage of equity investing, it would be ideal in product suitability terms.
Understanding the Clients Risk appetite is a mandatory exercise for implementing any Investment Strategy for client. Through our Risk Profiling services, we help our clients in gauging their risk bearing ability to identify the asset classes, matching with their investment needs. By Risk Profiling, we mean systematic Risk Assessment and Risk Management through assured Investment Framework, enabled with proper monitroing.
Insurance Planning is a decisive component of financial plan. Our Insurance Planning Service aims to offer our customers the best guidance to meet their Insurance needs, while integrating insurance into their wealth management strategy. Our Insurance Solutions are worked out by evaluating risks to recommend the clients proper insurance coverage for mitigating those risks. Through its association with well known Insurance companies, Knowledge First Wealth offers you-A range of Life Insurance Solutions as well as Non Life Insurance & Audit
These days education requires planned savings. Hence our Educational Planning Services assist you in acquiring quality education for your child by recommending suitable savings plans and investment vehicles; which can prove as the ideal investment decisions to meet your childs career goals.
As it is essential to plan your savings & investments for a relaxed life after retirement, the Retirement planning is considered as one of the most responsible decisions of Financial Planning. Our expert team of wealth planners suggest you a wide range of pensions and other investment vehicles as the devices of Retirement planning. With a rich experience of wealth management, Knowledge First Wealth is evolving as reliable Retirement Planner in pune..
Investment Planning & Asset Allocation
As a Chartered Financial Goal Planner, Knowledge First Wealth firmly believes in offering tailored solutions for investment planning of each client. We specialize in Wealth Management. Under the Asset Allocation Services, we suggest the clients to diversify their wealth across different asset classes having different risk profile & return potential. Asset Allocation is done with an objective to offset loss of one asset with the gain of other.
As a leading financial consultant in pune, Knowledge First Wealth also offers Tax Planning Services besides working as a Wealth Management Company. As the Money saved is ultimately money earned, we recommend our clients the most optimized as well as tax efficient investment options by considering the tax exemptions, deductions & other benefits to minimize their tax liability, while remaining compliant with the law in complicated financial situations.
Trust & Estate Planning
Estate planning, also popularly known as Legacy Planning, is the process of anticipating the transfer of an individual's assets after death. It includes transferring of assets like cash, clothes, jewellery, cars, houses, land, retirement, investment and savings accounts, etc. The assets are transferred in the following ways:
A will is a legal document that lays out the fate of your property after your death. It states who receives your property and in what amounts. Armed with rich experience & expertize, Knowledge First Wealth is a name you can trust on for availing relaible Will Services in pune.
A trust is an arrangement where you entrust property to one person or an organization. The person or trustee is taxed with managing the property on behalf of your beneficiary or beneficiaries. The person or an organization can also create an Investment Trust where he can pool the money and invest it in equity, mutual fund and other avenues; the benefits of which are transferred to the beneficiaries of Trust.
Knowledge First Wealth provides services like formation of wills, trusts or family constitutions through its tie ups with leading players in these businesses.
Who needs it?
- Business Houses, Entrepreneurs & Professionals
- Nuclear family or Joint family
- Family with no legal heir or with special child
- Family with beneficiaries across globe with different residential status
- NRI family with assets in India
- Family looking at generation skipping
- Multiple marriages
- Inheritance tax planning
- Person looking to protect his / her assets against unforeseen events
- Person who would like to distribute his assets as per his or her wish and not as per the governed law.
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Having tied up with the well known top Mutual Fund AMC and with an experience of over 15 years, Artham Solutions has made its mark as a Mutual Funds Consultant in pune.
Equity funds invest in equity instruments such as shares, derivatives, and warrants. All Equity funds are subject to market risk. Classification of equity funds is based on the type of stocks they invest in. Hence, equity funds may be diversified funds, large cap funds; mid and small cap funds, sector funds, and thematic funds, depending upon the sectors and the market segment that they invest in. Performance of various Equity funds may differ as per their portfolio composition.
Mutual funds that invest in debt securities may invest in money market securities or in longer term debt securities, or a combination of the two. The primary investment objective of liquid and debt funds is regular income generation. However, since the longer term debt markets offer the scope for capital growth, debt funds are offered along the yield curve, spanning very short term to long term products.
Mutual fund products invested in a combination of debt & equity in varying proportions are known as Hybrid Funds. Predominantly debt-oriented hybrids invest mostly in the debt market, but invest 5% to 35% in equity. The objective in these funds is to generate income from the debt portfolio, without taking on the risk of equity.
A Fund of Funds (FoF)
is a mutual fund that invests in other mutual funds. It does not hold securities in its portfolio, but other funds that have been chosen to match its investment objective. These funds can be either debt or equity, depending on the objective of the FoF.
Exchange Traded Funds (ETFs)
hold a portfolio of securities that replicates an index and are listed and traded on the stock exchange. The return and risk on ETF is directly related to the underlying index or asset. The expense ratio of an ETF is similar to that of an index fund.
A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities.
The biggest advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.
Systematic Investment Plan (SIP)
SIP or a Systematic Investment Plan allows an investor to invest a fixed amount regularly in a mutual fund scheme, typically an equity mutual fund scheme.
One, it imparts financial discipline to your life. Two, it helps you to invest regularly without wrestling with market mood, index level, etc. For example, if you are supposed to put a fixed amount every month in a mutual fund scheme, you need to find time to do it. When you have the time, you might be worried about market conditions and think of postponing your investments. Or you might be thinking of investing more if the mood is optimistic. SIP puts an end to all these predicaments. The money is automatically invested regularly in a scheme without any effort on your part.
SIPs help you to average your purchase cost and maximise returns. When you invest regularly over a period irrespective of the market conditions, you would get more units when the market is low and less units when the market is high. This averages out the purchase cost of your mutual fund units.
Fundamental & Technical Analysis
Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at opposite ends of the spectrum. Both methods are used for researching and forecasting future trends in stock prices, and like any investment strategy or philosophy, both have their advocates and adversaries.
Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock.
Fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies. Earnings, expenses, assets and liabilities are all important characteristics to fundamental analysts.
Technical analysis differs from fundamental analysis in that the stock's price and volume are the only inputs. The core assumption is that all known fundamentals are factored into price; thus, there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value, but instead use stock charts to identify patterns and trends that suggest what a stock will do in the future.
Professionals wait patiently for their trading edge (trading strategy) to setup. This may not always be as black and white as just a price pattern or an EMA crossover; some professionals just know when market conditions are ripe for an entry. This could be a combination of technical and fundamental knowledge or just one or other. The point here, is that a professional knows what they are looking for and they don’t waste energy and money going after anything that isn’t exactly what they’re looking for. They’ve developed their trading edge through years of learning and trial and error, which has developed a strong gut feel to compliment chart reading and market analysis.
Equity Advisory & Research (Mutual Fund)
Equity Research Point Plan Subscriptions Include Market Outlook Journal & Tips. We are delighted to start Equity Research Points plan to keep the transparency between the services provided and clients trading. This service is usually known for its transparency because of its features listed below.
We always keep your wealth goals in sight. Right fees combined with our personalized approach, research capabilities, highly skilled analysts, sectoral advisors, unique business understanding
Equity Cash F&O Trading
Futures and Options (F&O) are two types of derivatives available for the trading in India stock markets.
In futures trading, trader takes the buy/sell positions in an index (i.e. NIFTY) or a stock (i.e. Reliance) contract. If, during the course of the contract life, the price moves in traders favor (rises in case you have a buy position or falls in case you have a sell position), trader makes profit. In case the price movement is adverse, trader incurs losses.
Few fundamental things you should know about F&O trading:
- The F&O segment accounts for most trading across stock exchanges in India. They are the most popular trading instruments worldwide.
- To take the buy/sell position on index/stock futures, trader has to place certain % of order value as margin. Which mean if a trader buy future contract worth of Rs 4 Lakhs, he pays just around 10% cash to broker (known as margin money) which is Rs 40,000. This gives opportunity to trade more with little cash.
- Profit or losses are calculated every day until trader sells the contract or it expires.
- Margin money is calculated every day. Which means if the trader doesn't have enough cash (margin money) in his account (on any day when trader is holding the position), he has to deposit the margin money to broker or broker can sell his F&O contract and recover the money.
- Unlike stocks; derivative has an expiry. Which means if trader do not sell until a pre-decided expiry date, the contract is expired and profit or loss is shared with you by the broker.
- Future Trading can be done on the indices (Nifty, Sensex etc). NIFTY Futures are among the most traded future contracts in India.
Last few years have seen major swings in the equity market along with a major volume shift in the Derivative (Futures & Options) segment. We have focused on this segment, to ensure that the risk and return profile is in favor of the investor.
Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options, simply known as calls, give the buyer a right to buy a particular stock at that option's strike price. Conversely, put options, simply known as puts, give the buyer the right to sell a particular stock at the option's strike price. This is often done to gain exposure to a specific type of opportunity or risk while eliminating other risks as part of a trading strategy. A very straightforward strategy might simply be the buying or selling of a single option, however option strategies often refer to a combination of simultaneous buying and or selling of options