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I have investments in 12 quality schemes (predominantly diversified equity funds). The returns have been exceptional in the past three years with this sort of passive investment strategy. Now, should one be looking at a more focused and personalised investment help through a portfolio management service (PMS) with good track record to get decent returns in future?
-Ananth S Kodavasal
We don't think looking at a more focused and personalised investment help through a PMS will be a very wise thing to do. All a PMS will do perhaps is to eat into your profits by taking a cut out of you gains in the form of performance-linked fee. We don't think there will be any benefit that this so-called 'personalised' investment will provide you over and above what you can achieve through a plain and less expensive mutual fund. In fact, if you compare the performance of some of the PMS accounts with that of a few good diversified equity funds, you are likely to discover that the latter have done much better. Like any equity mutual fund, the returns from a PMS also depend upon the performance of the equity markets. And should the markets fall, even the PMS will suffer. Therefore, we don't think there is any significant value-add in it apart from the perceived charm of getting personalised investment attention.
Moreover, a long-term investor should not bother too much about the levels of the markets. Leave the job of deciding when to book profits for the fund manager. But still if you are too bothered about losing the gains that you have made, then it would be better to shift your money to safer balanced funds and MIPs, or redeem it altogether, rather than investing through a PMS.
This article was originally published on July 03, 2006.
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