What are Portfolio Management Services?

Last Updated: 5 Sep 2025

Investment portfolios usually consist of investments in a wide range of securities like stocks, bonds and cash equivalents. This combination depends on the investor’s risk tolerance level, which affects the returns potential of the portfolio investments.

But, establishing a strong investment can be challenging especially if you are an amateur investor. It requires extensive knowledge regarding the market and the securities, to calculate the RRR (Return Risk Ratio- a calculation of potential benefits against potential losses) accurately. This is where Portfolio Management Services or PMS come in.

What is Portfolio Management Services

PMS offers tailor-made investment solutions for each investor according to their risk tolerance and financial capability to get the best returns. Choices regarding the solutions are related to debt vs equity investment, the risk-to-return balance and quite importantly, the time horizon of the investor, i.e. how long they are willing to invest.

Types of Portfolio Management Services

Before diving into the details, many people ask, “what are portfolio management services?” To put it simply, they are expert-led plans that decide how to spread your money across shares, bonds, and cash. There are four main types of PMS services that individuals can pick, each matching a different personality.

• Active portfolio management is the speedy option. The manager keeps overtaking others by buying and selling often, hoping to beat the market’s average score.
• Passive portfolio management is the calm option. It copies a chosen index, such as the Nifty or Sensex, and simply stays on track, accepting steady but smaller wins.
• Discretionary portfolio management hands the control fully to the expert. The investor relaxes while the professional makes every turn without asking each time.
• Non-discretionary portfolio management is teamwork. The manager suggests moves, yet the final yes or no still comes from the investor.

Some providers also design thematic or ethical portfolios that follow special rules, like only green companies. By knowing these varieties, people can see that portfolio management services are not one-size-fits-all but flexible toolkits for different dreams. Choosing the right type is the first step toward confident investing success.

Active vs Passive Management

Management of portfolios happens in two ways:

• Active Investment Management:
  In this style, the primary objective is to beat the market index to generate higher returns for the investor. A specific index, such as Nifty or Sensex, is taken as the benchmark, and the investment managers make active decisions on the investments to outperform this market.
• Passive Investment Management:
  This style involves a passive style of decision-making and investment tracking. The objective of this style is to match the performance of a particular index. The index could be a Nifty50 or BSE Sensex, and the investment managers increase or decrease the weightage of investments as per the index they follow.

While the active management style has higher return potential, it also carries a higher risk quotient. Passive style management comes with lower return potential, but also has lower management fees.

Objectives of Portfolio Management Services

• Capital Growth
  This is one of the main responsibilities of a portfolio manager. A portfolio manager always looks for the best investment opportunity that appreciates the capital of the investor.
• Diversification of Risk
  This is done to effectively meet the goal of the investor while maintaining a healthy risk-return ratio. Diversification can happen in three ways-

1. Debt Vs Equity
   While equity investments are known for their high-risk and high-return potential, debt instruments can lower the risk of a portfolio and add liquidity.
2. Domestic Vs International
   A portfolio manager seeks to diversify risk by evaluating investment opportunities in domestic as well as international markets. This helps the investor diversify risk between various economies.

• Tax Planning
  There are various tax liabilities that an investor must adhere to while making investments. Moreover, multiple tax provisions can help investors reduce their tax liability. Professionals managing your portfolio ensure that all your investments comply with the tax implications while helping you save tax wherever possible.
• Rebalancing Portfolio
  This means reverting to the original mix of securities after fluctuations or movements in the market tilt the balance towards a particular form of security, and it is usually done annually.

Benefits of Portfolio Management Services

Apart from offering high returns for low risk, some of the other benefits of PMS are:

• Highly Customisable
  Based on an investor’s risk tolerance and expectations regarding returns, the portfolio manager can diversify the investments.
• Performance Tracking
  Most services have websites or apps where the investor can track the holdings in real-time. Unlike mutual funds, where the investor comes to know the status of the holdings once a month or a quarter, this gives the investor better control over investments.
• Maintain Liquidity
  Healthy liquidity ensures that in times of need, you can sell one or more of your assets to fulfill your immediate requirements.
• Gain Knowledge
  While an investment management service helps the investor reach the desired financial objective, it also helps them to improve their financial understanding. Continually updating its investors about various investment strategies and technicalities, they help the investors make an informed choice with future investments.

How Does PMS Work?

Imagine you collected pocket money for years and finally have a big amount. You decide to give this fund to an expert who understands the share market. That expert is a portfolio management company, and the action it performs is called PMS. To understand how it works, many people ask, “what is PMS investment?” It simply means handing your savings to professionals who build and steer a personal mix of assets for you.

Here is how the process usually flows.

• Step one: You open a separate trading and bank account that is tagged with your name only. Your cash never mixes with other clients’ money.
• Step two: You and the manager discuss goals, long-term wealth, and your risk appetite, whether mild, medium, or high.
• Step three: The manager writes an investment policy statement, a map that guides every future move.
• Step four: Orders are placed through the stock exchange, buying equities, bonds, or even gold funds as planned.
• Step five: The manager constantly watches prices, rebalancing the basket when weights drift.

Finally, detailed online and monthly reports show every gain, loss, fee, and tax, so nothing stays hidden, and steps stay transparent.

Features of PMS

Portfolio management services, often shortened to PMS, pack several features that make them different from mutual funds or direct DIY trading.

• First, every client owns a separate account; the shares and bonds rest in your name, not in a common pool. That keeps ownership crystal clear.
• Second, the strategy is tailor-made. If you dream of tech stocks or want steady dividend payers, the manager builds exactly that. This level of customization is the best feature in PMS services.
• Third, clients receive in-depth, line-by-line statements. You can open an app and view each stock, the buy price, today’s price, and the reason it was chosen. Such transparency turns share market portfolio management into an open book, not a secret diary.
• Fourth, PMS allows quick rebalancing. When markets wobble, the manager is free to trim, add, or shift holdings without waiting for fixed dates.
• Fifth, risk controls are strict. Stop-loss limits, sector caps, and regular audits guard the portfolio.
• Sixth, fees are flexible: they might be a flat percentage, a profit share, or a mix.
• Finally, professional research backs every decision, reducing guesswork and chasing after hot tips. That builds trust everywhere.

Key Elements of Portfolio Management

Before breaking down the details, people often ask, “what is portfolio management?” It is the art and science of choosing the right mix of investments to meet a goal while keeping risk under control. Here are the five main elements you must know about –

1. Goal Setting: Every journey needs a destination. College fees in ten years or a vehicle next summer give the manager clear targets to aim for.
2. Asset Allocation: This decides how much money goes into equities, bonds, cash, or alternatives.
3. Diversification: Putting all eggs in one basket is risky. By spreading holdings across sectors and sizes, share market portfolio management smooths the ride when one area falls.
4. Risk Measurement: Tools like beta, value at risk, and drawdown maps help the portfolio management company understand possible storms before they strike.
5. Monitoring and Rebalancing: Markets move daily, shifting weights. Regular checkups ensure the plan matches the original blueprint.

When these elements work together, portfolio management becomes a GPS, guiding savings safely toward their chosen destination. Master them, and investing feels less mysterious.

Who Should Consider PMS?

Portfolio management services are powerful, but they are not for everyone. They suit certain groups well.

• First, people with larger amounts to invest, usually more than the minimum set by regulators, often ₹50 lakh or above, gain the most. At that size, individual attention and direct stock ownership become practical and cost-effective.
• Second, busy professionals such as doctors, pilots, or start-up founders who lack time to follow daily market news can outsource decisions to seasoned experts. PMS services act like a personal coach, training the money while the client focuses on their main game.
• Third, experienced do-it-yourself investors who feel their skills have hit a ceiling may choose PMS to access deeper research, institutional-grade tools, and disciplined processes.
• Fourth, families needing tailored solutions, say, a mix of growth assets for parents and income assets for grandparents, find customization helpful.
• Fifth, clients seeking transparency beyond what mutual funds offer appreciate seeing every trade, dividend, and tax in real time.

However, beginners with small sums might start with low-cost index funds until their savings grow. The same goes for people who panic easily during market swings; even a portfolio management company cannot remove all risk. In short, PMS fits investors who value personalization and clarity greatly.

Opt for a Portfolio Management Service

Like any other form of investment, portfolios also carry with them the factor of risk, which is, admittedly, much lower than other types of investments. The risks involved are clearly stated in the terms and conditions of any management service you choose to avail yourself of. Make sure you go through the documents thoroughly and that you clearly understand every clause before signing up.