In this comprehensive discussion on "SocialPost Finance," host Nihal sits down with expert Wealthy Chakradhar to tackle the crucial investment question: Which investment vehicle—Mutual Funds (MFs) or Portfolio Management Services (PMS)—provides superior returns and offers the best portfolio strategy for the future?.
Key Insights from the Discussion:
1. Performance and Returns: A 10-year survey reveals that top-performing PMS funds delivered a 33% CAGR return, significantly outperforming the top mutual funds, which collectively returned 22%. This represents a huge difference of 10% to 11% in returns.
2. Investment Strategy and Quality: The primary reason for this superior performance lies in the concentration of investments. PMS portfolios are typically consolidated and 'crispy,' holding hardly more than 30 stocks. This allows the maximum amount to be allocated to only the best quality stocks, such as companies like HDFC Bank. In contrast, Mutual Funds often spread the invested amount across 100 companies, meaning only a very small amount is allocated to the quality stocks.
3. Filtering and Freedom: PMS involves a highly rigorous process, utilizing double or triple-level filtration for stock selection. Since large amounts (minimum ₹50 Lakhs) are invested, fund managers conduct intensive research and scrutiny, immediately removing companies that show poor strategy, poor management, or high debt.
Unlike MFs, which are constrained by SEBI regulations that mandate investment in certain sectors and limit allocation to a maximum of 6% per stock, PMS fund managers have the freedom to avoid an entire sector (like IT) if its outlook is poor, and they can engage in short-term holding and churning. When this freedom is available, fund managers generally perform better.
4. Risk and Duration: While PMS requires a high minimum ticket size (originally ₹5 Lakhs in 2000, raised to ₹25 Lakhs in 2014, and then to ₹50 Lakhs in 2019), the perception that high investment equals high risk is considered a misconception (apoha). The increased amount actually results in more protection, greater caution, and higher transparency.
Furthermore, PMS offers significant time efficiency: funds invested lump sum in PMS can double within four and a half years, compared to the 6 to 7 years generally required for Mutual Funds to double.
5. Market Demand: The product's sustained availability in India for 25 years and the repeated increase in the minimum investment level demonstrate that negative or zero returns have not been common, driving demand. Currently, there is approximately ₹30 Lakh Crores invested in PMS across India, with ₹3,000 Crores being added daily.
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Mutual Funds vs PMS: Which Gives Higher Returns in 2025? | Portfolio Strategy | Wealthy Chakradhar
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