Although Portfolio Management Schemes or PMS have many a reason to lure you, they are potentially harmful to your wealth. We recently came across a realty scheme delivers 3% over three years and a consumer-focused PMS loses capital.

Are they worthy of investing in? Should’nt an investor put his money into fixed deposits instead and earn a good night sleep instead? You get decent returns with a surety of getting your principal amount beck. A PMS charges a 3% entry load and an annual management fee of 2%. Over three years, the portfolio manager made around 9% of which 5% was given to the distributor. In effect, the AMC made 4%, the distributor 5% and the investor 3%! All the investment was of the investor. So, for the distributor and the investment manager, the return is infinite and for the investor, it is less than 1% per annum on a simple average basis! The ending of this PMS story was still positive. Many others have lost large chunks of the principal. But, even today, PMS continue to lure investors. Investors need to decide for themselves.