Mar 4, 2012

PMS: Is it Portfolio Management or Mismanagement?

Heads we win, tails you lose!

So you think that you’ve acquired the status of a HNI (High Net worth Individual) with a few lakh to spare and are looking beyond the realm of mutual funds either because already heavily invested in them or to design a customized portfolio for yourself or just to pamper your ego.
Photo by zabidazabadu

And here comes your wealth advisor with a exotic product called PMS (Portfolio Management Services) and tells you that it will provide you returns far better than plain-vanilla mutual funds. And you’re wondering, why not go for it?

Ok, now just try guessing
the name of a ULIP product offered by the mutual funds, brokerages and wealth management firms. Yes, you’ve guessed it right! PMS is another ULIP sort of product meant to fleece you. As I wrote earlier, one of the heights of financial stupidity is investing in Portfolio Management Services (PMS). Both ULIPs and PMS are used to make a fool of investors; the only difference being that while ULIPs are sold/mis-sold by Life Insurance Companies, PMS is mis-sold by Asset Management Companies (AMCs), Stock Broking Companies and Wealth Management Firms.

It is human nature to get tempted by fancy looking products; like moths to flame we’re invariably attracted by glamour. The term Portfolio Management Services (PMS) and ‘wealth management’ appear glamorous; similarly the name of various products offered under PMS also appear to be quite exotic; for example,

Here’s a list of few of these exotic investment products:

-ICICI Prudential PMS Aggressive Portfolio

-ICICI Prudential PMS Deep Value Portfolio

-Sharekhan PMS ProPrime

-Sharekhan PMS ProTech

-Absolute Freedom Option by Reliance Portfolio Management

-ING India BSE 200 Quant Equity Portfolio

-HSBC Alpha Account Signature Portfolio


I hope now you’ll remember what is the full form of PMS…it is ‘Portfolio Mis-management Scheme’.

But Fisher, making such generalized statements not supported by facts is not expected from you? Come up with some convincing arguments?

O.k. just wait, I’ll surely write a detailed post about what exactly is PMS and why it is considered harmful for your financial health.


Also see:

1. Height of Financial Stupidity

2. Truth behind Complex Financial Products

3. Money Quest Financial Stupidity Awards

3 comments:

  1. Is there any product for long term investing (with lock in period if necessary). What I am saying is mutual funds may go for short term incentives because of constant pressure of performance and end up matching just benchmark returns. Is there a product (or equity mutual fund) which really looks for good companies and hold on to them for a long time?

    ReplyDelete
  2. You Are . I Have ING PMS 200 since Aug 2010. In today i lost
    Rs. 2 lacs. Not good to invest in PMS

    ReplyDelete
  3. You left one of the worst in business - Kotak PMS. Absolute leeches. PMS returns good only when market is going up. Even a monkey which picks stocks at random makes money when markets are going up. Mutual Funds are far better portfolios to invest.

    ReplyDelete

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