Is PMS Better Than Mutual Funds?

by Anil Rego | Aug 20, 2025 | PMS

Whether PMS is better than mutual funds depends on your investment amount, risk tolerance, and need for customization. Portfolio Management Services aren’t universally superior—they’re designed for high-net-worth individuals with different needs than typical mutual fund investors.

You might be wondering about the real differences between these investment options. Before diving deeper, consider getting a free portfolio scan to understand your current investment position. Here’s a breakdown of when each makes sense for your financial goals.

Comparing PMS and Mutual Funds: The Facts

Feature	Mutual Funds	PMS
Minimum Investment	₹100–₹500 (SIP)	₹50 lakh
Customization	Standardized portfolio	Fully personalized
Direct Ownership	Own fund units	Own actual stocks/securities
Fees	0.5–2.5% expense ratio	1–2.5% fixed management fees; option to pay only on performance or a mix of lower fixed fee + performance fee over hurdle rate
Liquidity	Very high	High but may have restrictions
Regulation	Heavily regulated by SEBI	Less regulated

Why Mutual Funds Work for Most Investors

Mutual funds are better for most investors because they offer several compelling advantages: Accessibility: You can start investing with as little as ₹100 through SIPs Built-in diversification: Most funds hold 40-50+ stocks, reducing your risk Professional management at a reasonable cost High liquidity with easy entry and exit Strong regulatory protection under SEBI oversight Tax efficiency: Better tax treatment compared to direct stock ownership This raises an important question: if mutual funds are so accessible and well-regulated, why would anyone choose PMS? Understanding how to evaluate PMS provider performance can help answer this question.

When PMS Becomes the Right Choice

PMS becomes attractive for high-net-worth individuals who want:

Complete Portfolio Customization

Unlike mutual funds where everyone gets the same portfolio, PMS lets you:

Exclude certain sectors or companies based on your values
Focus on particular investment themes or strategies
Adjust risk levels according to your exact preferences

Learn more about choosing the right PMS scheme and selecting the best portfolio management services for your needs.

Direct Ownership Benefits

With PMS, you actually own the individual stocks and securities, which means:

Direct voting rights in companies
Corporate actions (dividends, bonuses) come directly to you
Tax planning flexibility through strategic buying and selling

Personal Relationship with Managers

You get direct access to portfolio managers for strategic discussions and regular updates on your investments.

Making Your Decision

Consider these practical factors:

Choose Mutual Funds If You:

Have less than ₹50 lakh to invest
Want professional management without high fees
Prefer diversified, less volatile investments
Value regulatory protection and transparency
Want easy liquidity and straightforward taxation

Choose PMS If You:

Have ₹50 lakh+ available for investment
Want complete control over your portfolio composition
Need customization for certain financial goals or restrictions
Don’t mind higher fees and volatility for potential higher returns
Want direct ownership of securities

Different investor types have different PMS options: conservative investors, risk-takers, and aggressive investors each have tailored approaches.

Can You Use Both?

Yes! Many sophisticated investors use a hybrid approach:

Core holdings in diversified mutual funds for stability
Satellite allocation to PMS for customization and direct ownership

This strategy gives you the best of both worlds—broad market exposure through funds and targeted strategies through PMS. Learn more about creating a balanced portfolio and wealth management strategies.

Final Considerations

For most investors, mutual funds are the better choice due to their accessibility, diversification, and cost-effectiveness. PMS only makes sense if you have substantial wealth, need significant customization, and are comfortable with higher costs and risks.

The “better” option depends entirely on your financial situation, investment goals, and how much involvement you want in managing your portfolio. Don’t let marketing claims about exclusivity or personalization sway you if a simple, diversified mutual fund portfolio better serves your needs.

Ready to explore your options? Consider our PMS strategies, learn about our investment approach, or get started with a free portfolio analysis to make an informed decision.