Difference Between Portfolio Management Services (PMS) Vs Mutual Funds

Posted by Mehul Kothari | Published on 05 Aug 2019
Image
Difference Between Portfolio Management Services (PMS) Vs Mutual Funds

The ultimate goal for all investments is the same – Wealth Creation. But the routes can be different. In this article, we will talk about two popular investment avenues – Portfolio Management Services and Mutual Funds, both of which have the potential to fulfill your financial goals.


Mutual Funds

Mutual Funds pool in money from a group of people and then invest the corpus in various asset categories as per the scheme’s objective. This investment avenue is professionally managed by a team of experts known as “Fund Managers” from Asset Management Companies.


How to Invest in Mutual Funds

There are numerous ways to invest in Mutual Funds.

  • Directly through the company’s website
  • Through intermediaries such as brokers or R&T Agents
  • Through online platforms that work as aggregators

Portfolio Management Service

Portfolio Management Services (PMS) is a kind of wealth management service. Like mutual funds, they are managed by professionals known as portfolio managers. These experts offer a wide range of curated investment strategies to benefit from the available opportunities in the market. 

They can be bifurcated into two categories of services:

  • Discretionary
  • Non- Discretionary

If the portfolio manager has complete control over the portfolio and can independently take trade decisions for the customer, it is referred to as Discretionary PMS. In the case of non-discretionary PMS, the portfolio manager does not have the authority to take any portfolio related decisions independently. He/she needs to manage the funds as per the client’s directions. Without the client’s approval, no buy or sell decisions can be taken by the portfolio manager.


Portfolio Management Services in India

As per SEBI regulations, only entities who are registered with SEBI for offering Portfolio Management Services in India can provide PMS to customers. Non-Resident Indians can also invest in these products. However, the documentation process is different (and slightly more exhaustive) than resident Indians. They need to open a PIS (Portfolio Investment Scheme) Account for the same.


What makes these two investment avenues different?

• Regulatory perspective
Mutual Funds are, comparatively, more strictly regulated in comparison to PMS. SEBI closely monitors their activities and investment decisions.

• Transparency
Both Mutual Funds and PMS offer timely disclosures to the clients. In the case of Mutual Funds, clients can get all relevant information such as portfolio disclosures, the commission given to distributors, daily performance data, etc. There are numerous websites through which the performance of each scheme can be tracked.

Even in the case of Portfolio Management Services in India, the service provider is required to make periodic disclosures to the clients. The only difference is that it is not available to the general public. This might make it difficult for newbie investors to make an informed decision or identify the best portfolio management services. However, if one reaches out to reputable providers, the credibility of information or quality of services is assured.

• Flexibility
In the case of Mutual Funds, the pooled-in corpus can only be invested in asset categories as per the scheme’s objective. However, in the case of PMS generally there is no such restriction. They need not need to confine their investments to a stated objective or any such stringent terms, unless the theme of the investments is restricted to certain sectors or market cap. This provides flexibility to the portfolio manager to take aggressive calls whenever required. For instance, if they sense risk or volatility and the situation demands, they can decide to maintain a 100% cash position and sell off all the equity holdings.

• Ownership
In PMS, the stocks are held directly by the investor. However, in Mutual Funds, they are held by the AMC or Fund House and the investors receive units of the scheme.

• Risk
Mutual Funds cater to all types of investors. An investor with a high-risk appetite can go for an aggressive equity scheme. Someone who is risk-averse or lower on the spectrum can go for a hybrid or balanced fund. The risk quotient in Mutual Funds is reduced to a certain extent as the risk gets spread across a wide range of stocks.

Relatively, investments through PMS are riskier. They are usually a highly concentrated portfolio (consisting of about only 20-30 stocks). However, with higher risk comes the possibility of higher returns with PMS.

• Entry Barrier
Portfolio Management Services may not be accessible for all retail investors. It is primarily targeted towards HNIs (High net-worth individuals). One can start mutual fund investments with only Rs. 500. However, in the case of Portfolio Management Services, the least investment required is Rs. 50 Lakhs*.

• Ease of Investing
Investments in Mutual Funds can be made easily through multiple channels such as the company's website, through R&T Agents or distributors or with the help of online platforms. However, the process for investment in the case of PMS is lengthier considering the high value of funds that are transacted through these accounts.

• Cost Structure
Portfolio Management Services are way more customized than Mutual Funds. Mutual Fund charges fees daily as a percentage of AUM and is capped for all schemes. Whereas, the costs involved in PMS is relatively more such as Entry Load, Fund Management expenses, Profit Sharing or Fixed Fee, custodian fees, audit-related fees, brokerage, etc. All these vary according to the provider. However, relatively high returns generated by PMS more than compensate for the costs involved.

• Taxation
In the case of Mutual Funds, the investors have taxed basis the type of scheme and the duration for which he/she had remained invested. For instance, in case of equity mutual funds, if one exits from the scheme within the lock-in period (usually 12 months), then 15% tax is applied. However, after that period the proceeds are taxed at 10% if gains exceed Rs. 1 Lakh. (Till the limit of Rs. 1 Lakh it is tax-free)

However, the taxation methodology is quite different in the case of PMS. Gains are calculated on every underlying transaction (and not just redemption) done by the portfolio manager. So, each time the portfolio manager sells a share, capital gain (or loss) is calculated for the investor and then taxed accordingly.


Which one should you go for?

So, is one of these a better option? No. Both Mutual Funds and Portfolio Management Services are managed funds. They have their own set of benefits and targeted towards a different set of investors. The choice between these two should be made after considering factors such as risk profile, investment objective, market understanding, etc. For instance, if you are looking for higher flexibility and customization, PMS may be a better option. On the other hand, if you do not have too many funds at hand but still want to enter into the equity market, Mutual Funds are your best bet.

Whatever be your choice, you can seek the help of experts from IndiaNivesh. They are adept at crafting portfolios customized as per the client’s needs and long-term goals.


Why should you trust IndiaNivesh with your hard-earned money?

  • Outstanding research experience of more than 11 years
  • State-of-the-art technological tools to keep abreast with the market knowledge
  • Highly skilled experts with the cumulative market experience of 300 years
  • Wide range of financial solutions – broking and distribution, institutional equities, PMS and strategies, corporate advisory, investment banking, and wealth management


So, are you looking for the best portfolio management services? Or wondering which is the best mutual funds to invest today? Or still struggling with how to invest in Mutual Funds? Then worry not and just reach out to the team at IndiaNivesh. They will ensure that you realize your financial goals irrespective of the route (PMS vs Mutual Funds) you take.






Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. *Effective from 1st Jan 2020.

PREVIOUS STORY

Understanding Stock Market Trends & their Types in India

Mehul Kothari द्वारा पोस्ट | 01 Aug 2019 को प्रकाशित |

Switch on a news channel when it is talking about the market and you are likely to hear a discussion about what the stock market trend was today and experts sharing their inputs on the Indian stock market trend analysis. But to make any sense of those discussions, it is important to know the trends in stock markets and their impact on our trading decisions.What is a trend in stock market parlance?Most investors look at the stock price chart and see those small lines going up and down. However, beneath all the daily fluctuations (or no movements sometimes) is a particular market trend. A trend is nothing but the general direction of the movement of the stock market or an asset’s price. Timing your transactions plays a key role in making money in the stock market. Correct understanding of what is the current trend in the stock market enables the investors as well as traders to make their buy or sell decisions. When the market is moving upwards (stock prices are on the rise) it is called a bullish trend. On the other hand, when the market moves down south and stock prices fall considerably, it is referred to as a bearish trend. How to know the stock market trend today?So, can you look at the stock price of a day and establish what is the stock market trend today? The answer is No. The Stock Market trend today is not decided basis only today’s stock price but rather its movement when compared to the earlier time points. Trends get established over a longer period. To know the stock market trend one needs to look at the movements for a certain period of time. There is no fixed guideline or specified duration for the movements to be considered as a trend. However, it is said that the longer the duration of the movement (irrespective of the direction – upward or downward), more noteworthy or reliable the trend is considered.What is Trend AnalysisTrend Analysis is the process of making use of the current trends (or past data) to predict future movements. For instance, with the help of stock market trend analysis experts try to make a forecast if a specific market sector which is currently growing will continue to do so in the upcoming future.How to identify trends in the stock market?Before we let you know how to identify trends in the stock market, you need to understand some important terminologies and the types of market trends. When you want to interpret a stock chart, think of your last visit to the mountains. Like how you would have observed many hills or valleys there, you would see such points even on a stock market. These are the points we will be talking about. Peaks or Tops This term is similar to the peaks of mountains. The highest or topmost price point that a stock touches is referred to as the “Peaks”. Troughs or Bottoms The lowest or minimum price point that a stock falls to is called the "Trough".Stock Market Trends Market trends are divided into three categories: Uptrend An uptrend describes the price movement of a financial asset when the overall direction is upward. In the case of an uptrend, the stock chart creates new milestones. Both the ends – peaks as well as troughs keep going further successively. Hence, on a continuous and regular basis, the stock’s price would touch a new high or fall lower than what it did before. However, one important thing to understand is that it may not be the lifetime low or high. This is the movement or status in the last few days, weeks or maybe months (depending on the duration of the trend).As long as the price keeps on making the higher swings, the uptrend remains intact. The steady rise in peaks and troughs indicates a positive sentiment in the market. The general expectation is that the stock would appreciate more rather than depreciate. Downtrend  In the case of a downtrend, the stock price keeps on falling continuously. In addition to the successive tops getting lower, the successive bottoms are also lower. The general view in case of a downtrend is that the stock value will fall further. Usually, no further buying transactions take place and investors use each peak (however little it may be) to sell off their current stock quota. Sideways Trend A sideways trend is a phase of ambiguity. The stock prices do not move significantly in either direction over an extended time frame. Both tops and bottoms continue to be constant. There is no notable movement to enable the market participants to make a buying or selling decision.Distribution DaysRemember that old saying, “All good things must come to an end”. It applies to the stock market as well. Eventually, in all up-trending markets, there comes a time when the selling activities overtake the buying activities. The day when the index closes (from the earlier day) on a higher volume (more selling than buying), is referred to as a “Distribution Day”. Market analysts believe that about five such distribution days over five weeks can easily reverse a market trend from upward to downward. Hence, one may pay close attention to Distribution days as they indicate the end possibility for an uptrend.Solid Market Rally Every cloud has a silver lining. One must continue to monitor the market when it enters a downward trend. At some given point of time, it will rally and get better for a couple of days. However, many such rallies are fake outs. Before taking any market-related action one must confirm that there has been a trend change towards the upward direction. This usually comes as an explosive day and signals the market trend has reversed. This in market parlance is referred to as “follow-through day”. On this day, the market closes upwards by a substantial and decisive amount.No new bullish phase has begun without this “follow-through” day. However, it is important to note that not every such day will lead to a new start (bull market). It just gives an indication and a timely heads-up to the investors (or traders) that they need to keep a constant look-out for their preferable stocks. How to act on stock market trends?There are many platforms (online or otherwise) that offer daily updates about the Indian stock market trend analysis. But before relying on any such analysis, it is important to establish the credibility of the source. IndiaNivesh is one trusted and well-renowned partner whom you can reach out to for stock market related expert opinion. Their team consists of experienced professionals with a deep understanding of the market who have helped investors create wealth for the last eleven years. The IndiaNivesh website has live updates and expert insights that help you make informed decisions. Now that you know what are the possible trends in the stock market and also know a reliable expert who can help you realize your financial goals, what are you waiting for? Remember, time is money!   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

अधिक पढ़ें

NEXT STORY

Mutual Fund Investment - Best Mutual Fund to Invest in 2019

Mehul Kothari द्वारा पोस्ट | 13 Aug 2019 को प्रकाशित |

Mutual funds are one of the most popular investment options available in the market. Most people prefer investing their savings in mutual funds because they have the ability to generate good returns over a longer horizon. You can regularly invest your savings into the mutual fund's schemes through Systematic Investment Plan (SIP) or a lump sum amount. However, to do so you must be aware of the top performing mutual funds in India. To help you in overcoming the confusion of selecting top mutual funds, we have listed down top mutual funds to invest in 2019.Top Performing Mutual Funds In India in 2019Let us now learn the factors that you must consider to select top mutual funds.Factors to Consider Before Investing in Mutual Funds • Performance of FundThe performance of the fund is critical for the selection of any top mutual fund scheme. The performance tells you about the returns generated by the scheme over the years. You must ensure that the performance of the fund is taken over a long period so that you can make a better judgment and decision. Also, review the holdings of the fund in the past years. Check the risks that the fund is exposed to. By doing all these checks you will get a better idea of the fund’s performance. • Fund Manager’s ExperienceThe experience of the fund manager plays a critical role in generating returns. The fund manager manages the capital of the mutual fund schemes and invests in the direction the market is moving. A good fund manager ensures that the mutual fund scheme is reliable for the long term. The mutual fund scheme can perform well only if the fund manager has the expertise and experience. Therefore, before putting your hard earned money into any top mutual fund, always consider the experience of a fund manager. • Expense RatioThe expense ratio is the fee that is charged by the AMC when you purchase their mutual find scheme. It is the charge for management, distribution, administration and promotion of a mutual fund. SEBI (Securities and Exchange Board of India) has capped these charges at 2.25% of the total fund assets. It is always recommended to purchase that mutual fund scheme which has a lower expense ratio. • Exit LoadExit load is a charge that is applied to the NAV of the mutual fund. It dents your investment value when you sell your units. The mutual fund schemes that charge lower exit load should always be considered as the first choice for investment. Since the exit load charge is applicable whenever you sell your mutual fund units, it is advisable to hold mutual fund units for the long term and reap its real benefits rather than exiting in the shorter period. • Track Record of Asset Management Company (AMC)Asset Management Company (AMC) is the fund house that manages the mutual fund scheme. The decisions at an AMC are taken by the Chief Investment Officer (CIO). If any poor stock is a part of the AMC then it raises questions on the selection of stocks done at the AMC level. Therefore, it is always recommended to track the past record of an AMC before investing in any of the top mutual fund schemes. • Integrity of Fund’s PromotersBefore investing in the mutual funds, it is important to understand who the promoters of the mutual fund are? You must look at their record in the financial service domain and experience. Securities and Exchange Board of India (SEBI) grants the permission to run a mutual fund only to people who have integrity, experience in the financial service sector and fulfils the criteria of minimum net worth. Even after that, it is important for you to check their background for your own satisfaction. The above mentioned are a few factors that you must consider before buying a top mutual fund scheme. Whether you are a beginner or a seasoned investor, you must be always active and alert while making an investment in the mutual fund scheme. To make things easier, you may invest in mutual fund through IndiaNivesh Ltd. Our in house experts understand your financial goals before suggesting you the apt mutual fund scheme.  Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

अधिक पढ़ें

Are you Investment ready?

*All fields are mandatory

related stories view all

  • Stock Charts – Importance of Stock Charts in Share Market
    Posted by Mehul Kothari | Published on 15 Nov 2019

    Often when people begin their investment journey in the stock market, they are swamped with multiple questions in their mind. The very first basic question that comes to the mind is how to determine which stock to purchase and which to avoid. Well, the answer to this question is - stock charts. The stock charts help you in evaluating and gathering all the important information that you must consider before purchasing a stock. By learning stock pattern analysis you can not only become a successful investor but also a successful trader. In this article, you will be learning the different aspects of stock chart reading. Let us first understand what are stock charts? What are Stock Charts? Stock chart is a sequence of prices plotted on a graph over a different timeframe. The y-axis i.e. the vertical axis of the chart represents the price and the x-axis i.e. horizontal axis of the chart represents the time period. Learning and understanding stock chart reading may look like a tough task initially but with little practice, you can master the art. All you need is the correct understanding of the basics of chart reading. They can help you predict the future price movement correctly. Let us now understand the various aspects of stock charts. What are the aspects of Stock Charts? Price and Volume The charts are generally divided into two parts; the price of the stock and the volume of the stock. For correct stock chart analysis and reading of stock chart patterns, it is important to read both price and volume together. This is because if you look only at the movement of the price you would not know how genuine the buying or selling is. For example, a stock has fallen over 5%. Initially, it may look very bad but if the fall is with lower volumes than the average, you may continue to hold the stock because the selling is not done by large retailers who drive the market. The same is the case when the stock is rising but with lower volumes. This rise in the stock price could be fake because when the big players enter the stock there would be a huge rise in the volumes.  Moving Average Lines Moving average lines are very important to understand the performance of a stock. They represent the movement of the share price over a period of time. With the help of moving average lines, you can understand whether the stock is overbought or oversold by large retail participants. The mutual funds and big institutions follow the stock chart patterns and change their positions in stocks when the price rises or moves below the moving average point on the graph. The key moving average points can be a 50-day line, 15-week line, etc. When the stock falls below the benchmark moving average line, the big players often sell their holding and exit the stock. Similarly, when the price moves above the benchmark moving average line, the big players enter and the stock price can rise sharply. Relative Strength Line Relative strength line helps to identify if the stock is a market leader or laggard. This is done by comparing the performance of a stock with the index i.e. Nifty or Sensex. A sharp line rising upwards on the graph indicates that the stock is outperforming the market while a sharp line downwards is an indication that the stock is a laggard and underperforming the overall market. The stock comes in the leadership territory when the Relative Strength line is rising for a breakout and set for a new high in the market. After learning about the various aspects of stock charts, let us learn about some of the basic stock chart patterns. Stock Chart Patterns Daily Stock Chart A daily stock chart on a graph represents the movement of the stock price on a specific day of trading. The day traders use daily stock chart patterns to take intraday positions. The chart has multiple moving day averages like 50 days, 100 days, etc. which the traders monitor continuously to take positions. When the stock rises sharply it is represented by a sharp line rising upwards and when the stock falls, the graph shows a sharp fall in the line. Weekly Stock Chart Just like a daily stock chart represents the stock price movement on a single day, similarly, the weekly stock chart represents the price summary of stock for a single week. This chart is generally used to forecast the price of stocks for the long-term. The weekly charts can display longer-term data on the screen which makes it easy for the analysts and investors to determine the long term trend of a stock. The new investors often get confused between the weekly and daily charts. The confusion is mainly regarding which charts are suitable for them. This section of the article will try to resolve that dilemma. Daily Vs. Weekly Charts The daily charts are said to be good for the traders who are looking for volume and price action on an intraday basis. The stocks on daily charts are said to be giving a breakout when it breaches the 50-day line on either side. On the other hand, for long term investors, weekly charts are ideal. These charts forecast the long term price of a stock along with its trend. It also keeps the investor's emotions under control as they can take wrong decisions looking at the volatile daily chart movements. The Bottom Line There is no doubt about the importance of stock charts in the share market. You can decode the price movement on charts and take advantage of it by making profits. If you want to learn more about stock chart reading and indulge in trading or investing based on it, you can contact IndiaNivesh Ltd. We are one of the most trusted and value-enhancing financial group with new technologies in India.   Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

    read more
  • Share Market Investment – Can I Invest all my Money in Stocks
    Posted by Mehul Kothari | Published on 14 Nov 2019

    Very often, you hear people making a fortune by making investments in the share markets and get lured to invest all our savings in it. Without a doubt, share market investments have helped investors grow their wealth and achieve financial goals. Investing in the stock market is essential for long-term wealth creation, as the returns generated by equities in the long-run have consistently outperformed the returns generated by any other asset classes, but investing all your money in share market is neither wise nor advisable. Shares are extremely volatile and carry a high degree of risk. If you are a beginner in the share market and the success stories of others have made you consider shares as an investment option, it is important to understand that there is no quick and easy way to make money in the share market overnight. Investing in the share market wisely requires you to have patience and also an understanding of how the stock market works. Why should you invest in the share market?1. Potentially higher returns which help beat inflation Equity investments have the potential to generate higher returns as compared to other investments in the long-run. One of the biggest challenges in the investment world today is finding investments where returns beat inflation.2. Dividend Income At the end of each financial year, a company declares dividends to be distributed to shareholders in proportion to their holdings, from the profits earned in that year. Thus, apart from long-term capital appreciation, investing in shares entitles you to the dividend income.3. Liquidity The shares are listed on the stock exchange and can be bought and sold through the exchange platform seamlessly. Share market tips for beginners If you are a beginner in the share market, here are few important stock market investment tips for you to help you guide with your investments1. Define your investment objectives Before considering investing in shares, or for that matter any instrument, it is important that you clearly define your investment objective along with the time frame for it. Investments in the stock market have the potential of higher growth in the long-term but are the extreme volatility in the short-run. If you are looking at investing your money for a fairly long time, you will benefit tremendously by investing in shares as compared to other less volatile assets. As stock markets are volatile in nature, investing for short-term investment needs is not advisable. 2. Assess your risk tolerance When it comes to investment decisions, assessing your tolerance to risk is extremely important as it is individual for each investor. Share markets are volatile and your ability to withstand the fluctuations in the market is crucial.  If your tolerance to risk is low, you are likely to get anxious about your investments; you are more likely to make emotional decisions about investments rather than logical decisions. However, once you start gaining more knowledge about stock market investments and also understand volatility, your perception will evolve considerably and allow you to take more analytical decisions. 3. Understand the basics of Share Market Before you start investing in the stock market, it is important for you to have basic understanding of the stock market and the individual securities in the stock market. Getting familiar with financial terms such as P/E ratio, EPS, CAGR, etc. stock selection strategies and stock order type will help in the research and selection process of stocks.4. Pick the right stocks Investing the shares is easy, but being successful with your investments requires effort. Whether you are seasoned investors or a beginner, stock selection plays an important role in determining the success of your investments. You should do proper research and analysis of the stocks that you are looking to invest in. Various aspects such as financial soundness, quality of management, competitor’s performance, the competitive advantage of the company will help you understand the strength of the company. You should invest in fundamentally strong companies for potentially higher returns.  5. Do not let emotions drive your decision The performance of stocks to some extent is driven by market sentiments. If the market sentiment is bearish, it tends to influence the stock price negatively even if the fundamentals of the company are strong. In such situations, long-term investors should not sell their investments just because the market sentiment is negative. Once you invest in the stock market you should not get influenced by short-term price changes of the securities on the account of speculation, rumours and in general the market sentiments.  6. Keep your expectations real All of us want to achieve the best possible returns from our investments. But at the same time, it is equally important to be realistic about the return potential. Even though some stocks have generated over 100% returns for investors in the past, it does not mean that every investment in stocks will fetch you similar returns. The idea of investing in the stock market is to have positive returns on your savings which can beat inflation in the long-run and help you achieve your financial goals with ease.  7. Diversify your portfolio Diversification is extremely important to optimise the returns on your investments. The basic tenet of financial planning is to have a diversified portfolio in different asset classes to achieve your investment objective by not relying on the performance of a single asset class. Even in the case of shares, you should diversify your portfolio in shares of different companies, sectors, and industries to avoid relying on the performance of one sector.  8. Invest only your surplusYour investments in the stock markets can fetch you high returns in the future. However, unlike fixed-income investments such as bonds and FDs, returns from the stock market are not guaranteed. The higher the chances of returns, the higher are the risk involved. Hence, you should only invest the surplus funds you have into the stock market without compromising on the other investments such as your life insurance, health insurance, emergency funds etc.   The final word Shares should be a part of your investments, as they offer huge growth potential, but they can’t be your only form of investment. You need to diversify your portfolio in various asset classes to get maximise your returns and minimise risk for your investments. Your investment objective, risk profile, time horizon all play an important role in ascertaining how much can you and should you invest shares. If you are wondering where to start, then just get in touch with our financial experts from IndiaNivesh to guide you with your investments.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more
  • Mutual Fund Performance - Five ways to measure Mutual Fund Performance
    Posted by Mehul Kothari | Published on 18 Sep 2019

    Mutual fund investment plans have emerged as a preferred investment choice for a large number of investors in the last few years. Earlier, most of the households invested their savings in traditional investments like FDs, PPFs, and gold. However, the need for better returns from their savings and growing awareness of other investment options, have led investors to move away from traditional investments and explore other options such as mutual funds.What are mutual funds? In simple words, mutual funds are pooled investments from a large number of investors. They collect money from various individuals and entities that have a common investment objective and subsequently invest this pool of money in various stocks, bonds, and other securities. Thus, mutual fund investment plans allow you to distribute your invested money in a large number of securities than you could put in your portfolio. As a mutual fund investor, you hold units that represent a portion of your holdings in the scheme. Why is it advantageous to invest in mutual funds? Mutual fund investment no doubt is one of the smartest investments for almost any investor. Here are a few of its advantages:1. Simple A mutual fund is the simplest way to invest in capital markets for higher returns. If you are a novice but wish to invest in the capital markets, then mutual funds provide you with the simplest platform to invest in a healthy mix of stocks, bonds, and other securities.2. Easily accessible Mutual funds’ investments are easily accessible for all investors and as an investor, you can start investing in mutual funds for an amount as low as Rs. 500. 3. Diverse Mutual funds allow you to diversify your portfolio as you can gain access to different segments of the market through various mutual fund investment plans. Thus, you can invest in a variety of assets, sectors, securities, etc. 4. Professionally managed Mutual fund schemes are professionally managed by fund managers who have the expertise, time and resources and make sound investment decisions based upon the objective of the scheme.As the number of mutual fund schemes available in the markets has increased dramatically, evaluating the performance of mutual funds is of utmost importance to make wise investment choices. If you are wondering which is the best mutual fund to invest right now and how to evaluate the performance of mutual funds, then here is a simple guide for you. Top 5 measures to evaluate the performance of a mutual fund1. Compare performance with an appropriate benchmarkFor every mutual fund, there is a benchmark index to which you can compare the mutual fund performance. If your mutual fund investment is consistently generating higher than the benchmark, then it reflects the ability of the fund manager to manage the portfolio better. The important aspect here is to compare the mutual fund performance with an appropriate benchmark.Even when you are comparing it with different mutual fund schemes always look at the returns of other funds from the same category with a similar investment objective. Comparing the performance of a midcap fund with that of a large-cap fund would be like comparing apples to oranges. Hence, be careful and make relevant comparisons to see the performance of mutual funds. 2. Alpha Alpha of the fund helps measure the performance of the mutual fund on a risk-adjusted basis. Alpha takes into account the volatility of the mutual fund and compares the risk-adjusted performance of the fund to the benchmark. A positive alpha indicates that the fund manager has managed to outperform your mutual fund investments as compared to the benchmark. Similarly, a lower alpha indicates an underperformance of the fund as compared to the benchmark. Thus, the more positive the alpha of a fund, the better it is. 3. BetaApart from the risk associated with the security due to the nature of the asset class, every investment is exposed to a systematic risk which is due to the state of the economy or market in general and is unavoidable.The beta ratio captures this market risk of your investment. A higher beta indicates that the fund will be more volatile than the market. So, if a fund has a beta of 1.15 then it is 15% more volatile than the market. Note: Alpha & Beta both are risk ratios and are crucial means to find out the performance of mutual funds. The two ratios help you to determine the returns generated as compared to the risks undertaken. As an investor, you should look at funds that have a higher alpha and lower beta. 4. Portfolio diversification The advantage of investing through mutual funds is that they help you diversify your portfolio. A well-diversified portfolio helps you to mitigate the risks associated with investing in funds focussed on too few stocks or sectors or asset classes. So, to ensure that you achieve the desired results, you should review the holdings in your mutual fund. You can check the portfolio of your mutual fund by looking at the fund fact sheet. 5. Expense RatioOne of the biggest challenges for mutual funds is the high fees associated with it. Running any mutual fund involves costs that need to be borne by the investor. The expense ratio is the percentage of money spent to pay the salary of the fund manager, his team and other expenses. So, if the expense ratio of a mutual fund is high then it will reduce the overall returns generated by your mutual fund investments. So, while choosing a fund you should also see that the expense ratio is not very high. Here is a list of best mutual funds for 2019 across popular categories you may consider for investing now: The Bottom LineChoosing to invest in mutual fund investment plans is just the start of your journey as an investor. The important aspect of any investment decision is that it helps you achieve your goals within the desired time frame and considers your tolerance to risk. Mutual fund portfolios are tailor-made to meet your unique goals and are one of the best ways to achieve your investment objectives.So, if you want help with your mutual fund investment portfolio or you want to find the best mutual funds to invest now or simply want guidance, you can always seek assistance from a platform like IndiaNivesh. Their experts will help you build a portfolio that’s best suited for you.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more