PMS vs Mutual Funds In 2025: Which Investment Option Is Right For You?
With an increasing number of investment options in India, investors should choose wisely between various investment options, since a wrong choice can possibly erode wealth, delay financial goals, or expose investors to unnecessary risks. Among the many options available - Mutual funds and Portfolio management services or PMS are key options available for investors.
Both PMS and mutual funds are managed professionally and aim to provide capital growth to their investors. However, investors have to make an investment decision based on their risk appetite and investment capability. This blog studies a detailed comparison between PMS vs mutual funds.
What Is Portfolio Management Services (PMS) Investment?
PMS is an investment service where SEBI-registered investment professionals invest money on behalf of investors to align with their financial goals and risk-taking capability. PMS, especially the discretionary and non-discretionary setups, allows investors to directly own the financial assets in their own name.
There are three types of PMS:
1. Discretionary PMS: In discretionary PMS, the portfolio managers have complete control over investment decision making on behalf of investors.
2. Non-Discretionary PMS: In non-descriptionary PMS, the final investment decision is taken by investors, portfolio managers provide recommendations.
3. Advisory PMS: In advisory PMS, the portfolio manager provides investment advice, while the investor retains the responsibility of independently carrying out the transactions.
This allows a highly personalised investment management service that is available as per the goals and objectives of investors. As of 30th April 2025, Portfolio management services India has INR 38,09,215 crores worth of assets under management1.
Eligibility And Minimum Investment
The portfolio management services minimum requirement is INR 50 lakhs. This makes it exclusive for high net-worth individuals seeking customised investment portfolios.
The high investment requirement also ensures that investors have enough money to bear the high risks associated with PMS.
Key Features Of PMS
Here are some key features of PMS:
1. Customised Portfolios: PMS investment strategies are designed as per the investment objectives of individual investors, considering their risk profile.
2. Expert Management: PMS managers are SEBI-registered, which ensures that they have the knowledge to conduct investments.
3. High Risk: PMS can be more risky than mutual funds since they can invest in highly volatile asset classes, including derivatives.
4. High Costs: PMS charge high management fees. The customisation that investors receive comes at an added cost.
What Is A Mutual Fund?
Mutual funds collect capital from several investors and invest the total amount into the financial markets with the aim of capital appreciation. Mutual funds issue their own units to investors, and the value of these units is called Net Asset Value (NAV). NAV fluctuates daily, based on the performance of the underlying asset in the portfolio.
There is a wide range of mutual fund schemes depending on their investment asset class, associated risk, and structure. As of April 2025, mutual funds have INR 69,99,837 crores as assets under management2.
Eligibility And Minimum Investment
There are no eligibility criteria for mutual fund investments. Anyone with a bank account can invest in mutual funds. Mutual fund investments start from as low as INR 500 and can be suitable for investors who are beginning their investment journey3.
Key Features Of Mutual Funds
Here are some features of mutual funds:
1. Professional Management: Mutual funds (MF) portfolio management is done by professional fund managers. The research conducted by mutual fund managers leads to informed decision-making and risk management.
2. Diversified Portfolios: Mutual funds, especially equity mutual funds, offer diversified portfolios and spread their investments across various stocks.
3. SEBI-Regulated: The mutual funds industry in India is regulated by the SEBI, which ensures transparency and safety of investors.
4. Low Investment: Unlike PMS, mutual funds do not have high investment requirements. Some schemes allow investments as low as INR 500 or INR 1000, making it affordable for everyone.
Key Differences: PMS vs Mutual Fund
Let us take a look at difference between PMS Vs mutual funds:
Particulars | PMS | Mutual Funds |
| Objective | To provide investment management services to high net-worth clients | To pool money from investors and professionally invest. |
| Minimum investment | INR 50 lakhs | Start from INR 500 |
| Investor type | High net-worth individuals (HNIs), Very High net-worth individuals (VHNIs) and Ultra High net-worth individuals (UHNIs) | Retail investors including HNIs |
| Ownership | Assets owned directly by the client | Investors own units of the mutual fund scheme |
| Customisation | Offers high customisation | Investment is done as per scheme objectives |
| Fee Structure | Usually charge high fees
Entry Load - 1-3%, Management Fees - 1-3%, Profit Sharing (if profit exceeds certain %)and Exit load - 1-3%4. | Charges low fees as compared to PMS.
Management fees (expense ratio) - 0.5 - 2.5% and Exit load - 0.5 - 3%5. |
| Risk | Tailored as per individual investors, usually high | Depends on the scheme |
| Return Potential | High return potential, depending on the portfolio | Depends on the type of scheme |
Mutual Funds Or PMS? Compare The Benefits And Risks
Choosing between Portfolio Management Services (PMS) and Mutual Funds depends on your risk appetite, capital, and investment goals.
Here is a simplified comparison to help you decide:
Advantages of PMS (Portfolio Management Services):
- Personalised portfolio management tailored to your goals, preferences, and risk profile.
- Direct ownership of securities, unlike mutual funds where you hold fund units.
- Access to exclusive investment opportunities like unlisted shares and niche strategies.
- Potential for higher returns through more aggressive and customised strategies.
Disadvantages of PMS:
- High entry barrier - requires a minimum investment of INR 50 lakhs.
- Higher costs due to portfolio management and performance-linked fees.
- May not suit low-risk investors due to strategy volatility and limited diversification.
Who Should Choose PMS?
PMS is best suited for high-net-worth individuals with over INR 50 lakhs to invest. It works well for those who are comfortable taking on higher risk and volatility in pursuit of better returns.
It also appeals to investors looking for personalised investment management tailored to their financial goals..
Advantages of Mutual Funds:
- Low minimum investment - accessible to all investors.
- Wide variety of funds across asset classes, suited to different risk levels.
- SEBI-regulated and transparent, with regular disclosures and easy exit options.
- Ideal for long-term wealth creation through systematic investment.
Disadvantages of Mutual Funds
- No control over fund decisions - all investment choices are made by fund managers.
- Investors do not own underlying assets directly.
- Subject to market risks, just like other market-linked instruments.
Who Should Choose Mutual Funds?
Mutual funds are ideal for first-time investors or those with long-term financial goals. They also suit individuals who want to start investing with low capital, offering an accessible and diversified way to build wealth over time.
Factors To Consider Before You Invest In Mutual Fund Or PMS
Now let us take a look at the factors that you must consider while choosing the best investment options in India like mutual funds or PMS for your portfolio:
1. Investment Capital: An investor must select PMS only when they are comfortable in risking INR 50 lakhs, or else mutual funds can be a better choice.
2. Risk Appetite: Along with the PMS returns vs mutual funds returns, investors should also consider risk. PMS portfolios are generally high-risk, high-return strategies, so investors with a high-risk appetite should only choose PMS.
3. Investment Horizon: Mutual funds can be more suitable for long-term investment and saving purposes. Choose mutual funds if your investment horizon is long-term.
4. Tax Implications: Investors must understand the tax implications and savings associated with different mutual fund schemes and the tax implications of PMS before selecting.
To decide between PMS and mutual funds, investors should align their selection with their individual financial goals.
Diversification Into Fixed Income Investment
Whether an investor invests in mutual funds, or opt for a portfolio management service, they can also include fixed-income instruments in their overall portfolio to reduce risk and enhance stability.
Investors can use Grip Invest’s platform to find high-yielding, high-safety, properly vetted corporate bonds for their portfolio diversification, which might not be offered by most debt mutual funds.
Conclusion
Investors can choose between PMS vs mutual funds on the basis of their investment goals and risk preferences. Investors with a higher risk appetite and having the required minimum capital may consider PMS, while mutual funds remain a widely accessible option suitable for investors across varying capital levels. Investors must completely understand the workings and risk of the investment product they are choosing.
While PMS and mutual funds form the core of many portfolios, adding fixed-income instruments like corporate bonds can reduce overall volatility, especially when discovered through platforms like Grip Invest.
FAQs On PMS Vs Mutual Funds
1. Are PMS riskier than mutual funds?
Yes, Portfolio Management Services (PMS) can be riskier than mutual funds. PMS are generally designed to take on high risk to provide superior returns to the investors. Some strategies can invest in high-risk assets and can be highly volatile. Some mutual fund schemes, like small-cap funds, can also have a high degree of risk.
2. Which is better for long-term wealth creation: PMS or mutual funds?
Both PMS and mutual funds can be used for long-term wealth creation. However, PMS have high risks associated with them. Hence, they might perform poorly during market corrections. Mutual funds can be a safer option for long-term wealth creation, specifically for small investors.
3. What fees are involved in mutual funds and PMS?
PMS charges management fees and expense ratios. Some PMS can also charge entry and exit loads. If gains from PMS exceed a certain percentage, then PMS can also charge a performance-based fee or profit sharing. These fees are generally higher than mutual funds.
4. Who can invest in PMS in India?
In India, PMS are available to HNIs who can invest a minimum of INR 50 lakhs, as mandated by SEBI. PMS is ideal for investors seeking personalised investment strategies and professional management of their equity or debt portfolios.
References:
1. SEBI, accessed from: https://www.sebi.gov.in/statistics/assets-managed.html
2. Association of Mutual Funds In India, accessed from: https://portal.amfiindia.com/spages/amapr2025repo.pdf
3. Association of Mutual Funds In India, https://www.amfiindia.com/investor-corner/investor-center/systematic-investment-plan.html
4. The Economic Times, accessed from: https://economictimes.indiatimes.com/wealth/invest/what-are-the-charges-of-portfolio-management-service-pms/what-is-pms-profit-sharing/slideshow/108229726.cms
5. Live Mint, accessed from: https://www.livemint.com/money/personal-finance/the-dark-side-of-mutual-fund-fees-what-s-really-eating-into-your-returns-investing-investments-11738652434276.html
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