Most of us spend our lives wondering when and how our money gets spent! Every month end, we promise to save more and build our bank balance from the coming month, but somehow, the expenses just keep piling up!
A trait of most financially successful people is that they first save, invest what they save and then spend what’s left of it – month after month. For many of us who find that challenging, hiring a financial advisor is the key. For HNIs, who have over Rs.25 lakhs of disposable funds available, having a Portfolio Manager is the best way ahead.
What does the portfolio manager do? What is portfolio management?
Let’s take a quick look.
What is Portfolio Management?
As discussed above, Portfolio Managers can manage funds of HNIs and also those of large financial institutions such as Mutual Funds.
Portfolio management is the art and science of making sound financial decisions. These decisions are generally made about the investment mix and policy, matching investments to your long term financial objectives, asset allocation and balancing risk against performance. Portfolio Managers determine the strengths, weaknesses, opportunities and threats of each and every investment that is made.
Fund investing is done keeping in mind the following parameters:
Debt vs Equity, Domestic vs International, Growth vs Safety and many other trade-offs which are encountered in the attempt to maximize returns and reduce risks.
Portfolio Management can be active or passive. Active fund managers attempt to beat the market returns by actively investing in stocks or investments of their choice. They take investment decisions based on research and their own rich experience.
Passive management simply tracks a market index (NSE/ BSE), which is commonly known as indexing or index investing. A fund indexed to BSE could be investing only and only in top 50 stocks of BSE that influence the BSE. If any stock falls out of these 50 the fund is also compelled to sell that articular stock.
What does a Portfolio Manager do?
Portfolio managers are responsible for investing an investor’s or a fund’s assets by overseeing proper investment strategy and carrying out day to day trading.
A portfolio manager is usually an experienced broker, investor, fund manager or a trader with a lot of industry knowledge and a proven record of performance. They often have a specific investment approach.
Portfolio Management Services (PMS):
Investors who invest in a PMS need to invest at least Rs.25 lakhs. They can also give shares worth Rs.25 lakhs to the fund manager, who can then invest those shares as per his discretion.
These services are offered by brokerages and mutual funds who are registered with the SEBI. There are two types of PMS:
Here, the fund manager takes all investment decisions on behalf of the investor.
Here, the fund manager can only suggest investment ideas, while the decisions will be taken by the investor.
The biggest similarity between a PMS and a Mutual Fund is that the manager handles the money on behalf of his clients. In case of Mutual Funds, the investor gets units that represent the stocks. In a PMS, the investors hold stocks in a demat account owned by him, but the fund manager has the power to operate it.
Most portfolio managers share a username and a password where their customers use their website and see their portfolio statements. As per SEBI’s instructions, a portfolio manager is required to provide an in-detail performance report to their clients every 6 months.
To learn more about portfolio management or to be a portfolio manager, opt for BSE Institute Limited’s short-term online course on Portfolio Management. This course helps you learn and excel at the portfolio management practices that can help you get good returns on investment.