What are the advantages of portfolio management service (PMS)?

My question is with regard to Portfolio Management Services. Some of my advisers have asked me to enter them. I want to ask how they are regulated and what is the transparency in them and if they are a good investment option.
- Naveen, Delhi

Transcript: There are some good Portfolio Management Services (PMS) and some bad ones. But does PMS have an advantage? The answer is no. Taxation An equity mutual fund remains tax-free regardless of buying and selling of stocks by the fund manager if it is not redeemed within one year. This does not happen with a PMS. In case of PMS, the fund manager is acting on your behalf through a power of attorney. Returns there are typically short term capital gains and taxable. Resources Except for a few PMS schemes, mutual funds have natural advantages in terms of scale, brand and better resources. When it comes to deploying a talented manager to a fund or a PMS, the more able guy is likely to be entrusted with the mutual fund. Regulation PMS are registered and have to follow capital adequacy norms and other SEBI regulations. The minimum amount for them is 25 lakhs. This means that they aren't meant for the small guy. The thinking is that the big guys can 'take care of themselves'. On the other hand, mutual funds are far more tightly regulated and their transparency and disclosures are far higher.

This article was originally published on June 26, 2017.