Factors Relevant for Portfolio Management Services in India

The people who invest in and who have any sort of relation with the Indian capital markets can tell you that there are numerous such instances where people have lost substantial amounts of money due to all sorts of wrong decisions, excessive greed, or because of the inability of taking the required risks.

Hence, we need to know how to avoid making such mistakes and make optimum profits. Portfolio management services in India is one of the most widely used and preferred mechanisms that helps in spreading the investments in various asset classes for reducing the risks. PMS Services are carried out on the basis of our age, investment horizon and risk profile.

Investment horizon is a very critical factor. A comparatively younger person is in a better position to invest in risky assets. Although there is no fixed ceiling on the age, it has been observed that a 30 years old person can invest about 70% of his money in equity, which is a risky investment, while the rest of the money can be invested in gold and debt. In the same manner, a 50 year old person can afford to invest a lesser amount of his money on risky investments like equity and go for safer investments like gold and debt.

The next factor is the risk profile of an investor. A person having high risk profile will mean that he will invest the largest part of his money into equity. Similarly, a person with a low risk profile will put majority of his money in safer and lesser risky investments such as gold and debt.

Another important factor is market status. Although some of the financial planners avoid discussing about this factor while deciding upon portfolio mix. Market status can be arrived at by taking the market’s PE ratio into consideration. When the market experiences bullish sentiments, everything seems to be overpriced, because of which it would not be wise to put your money in equities, even if you have the required risk appetite.

A market whose PE ratio is below 15 is considered as under priced market, while a market with PE ratio below 20 is referred to as an over priced market. However, a market with its PF ratio ranging between 15 and 20 is considered as a fairly priced market.

Hence, an investor should make alterations to his portfolio mix whenever any change occurs in its factors like investment horizon and market status. Investment horizon changes overtime, which also depends on certain determinants. Market status also keeps switching between under priced, fairly priced and over priced mode. Hence your portfolio mix should keep changing accordingly. Hence for the providers of pms services in india it is important to take heed of all the above factors for effective catering.