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How to select a top-performing Portfolio Management Service (PMS)


Portfolio Management Service or PMS in short is a service where qualified fund managers, manage your portfolio according to a specific mandate.
The goal of any portfolio manager is to maximize returns while minimizing risk, a good one at that delivers consistent performance controlling for risk.
Before we understand how to select a top performing PMS, an investor must understand where does he or she stand in terms of their risk appetite.

 

What type of investor are you?

 

What factors to look at?

If performance is all one looks at in the process of selection, then one will be mostly left with funds that were the result of the recent bull runs and not because of managerial skill that is necessary to outperform in the future. This is the reason behind the disclaimer, past performance is not indicative of future.
We recommend you invest in funds that generate higher returns consistently in that category, because a consistently performing fund is likely to outperform in the future, backed by the skills of the manager, as it has done so in the past.
Investors after filtering out the funds based on the factors mentioned above should now look at the risk-return metrics to understand the risk that the fund takes to generate returns. Doing so helps one understand the risk they can tolerate and invest accordingly.

 

Conclusion

While it is easy (in theory) to filter out the top performing PMS, in practice the top performing scheme might not be the best for you unless you understand what type of investor you are and what is your risk apetite. We recommend you invest in funds that are outperforming the benchmark in respective categories consistently justifying your risk tolerance by deep diving into risk return metrics. We have explained in our earlier articles, more about consistency and the parameters required to help you in the process kindly read that in case you have missed it.