Mutual funds vs PMS: Which is the better option?

A fintech app asked me to redeem all my mutual funds and take PMS from them. Should I go with such a service? Please advise as I am very close to my retirement.

In both cases, portfolio management services (PMS) and mutual funds, a fund manager takes care of the portfolio. While a PMS will offer a more customised approach, there's a catch.

You'll need a hefty sum of capital - at least Rs 50 lakh. On the other hand, you can start your investment journey with mutual funds for as little as Rs 100.

Also, one of the advantages of sticking with mutual funds is its tax benefits. In an equity mutual fund, a fund manager will make multiple transactions that incur tax. However, you don't need to bear this expense. The only tax you need to pay is upon redemption from the fund.

A PMS trades stocks from your demat account. So, you bear transaction costs and short- and long-term capital gains. So, this leads to much higher expenses which can eat into any returns you get through the PMS.

Further, transparency is crucial for assessing any investment product. Mutual funds are heavily regulated, requiring fund houses to publish daily NAVs and disclose their portfolios monthly. This ensures that investors have full visibility into the fund's strategy and performance. In contrast, PMS accounts don't have the same level of transparency as details are available only to the investor and the PMS provider. Not in the public domain.

Here are the differences between the two at a glance:

Conclusion

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Also read:
PMS providers hide more than they reveal
Mutual funds vs PMS: Which one should you choose?