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PMS or Mutual Funds – Which One is the Best?
Reviewed by: Fibe Research Team
- Updated on: 25 Nov 2025
When it comes to building long-term wealth, investors often wonder whether to choose mutual funds or Portfolio Management Services (PMS) or both. While both are popular investment options, they cater to different investor segments, offer different levels of control and come with varying costs and returns.
Let’s explore what each of them means, how they differ and which might suit your risk profile and financial goals better.
Table of Contents
What is a Portfolio Management Service (PMS)?
A Portfolio Management Service (PMS) is a professional investment service where qualified portfolio managers manage your investments on your behalf. In simple terms, it’s like hiring an expert to make personalised investment decisions for you.
PMS is primarily designed for high-net-worth investors (HNIs) who want customised portfolio management, unlike mutual funds, where all investors in a scheme have the same portfolio.
Key features of PMS:
- Personalised investment strategy customised to your financial goals
- Direct ownership of securities (unlike pooled mutual funds)
- Typically requires a minimum investment of ₹50 lakhs as per Securities and Exchange Board of India guidelines
- Offers higher flexibility in asset allocation
What are Mutual Funds?
Mutual funds are investment tools that pool money from many people to invest in a diverse portfolio of stocks, bonds and other assets. These funds are managed by experts and regulated by SEBI, ensuring transparency and investor protection.
Mutual funds are accessible to all investors, whether you’re a beginner or an experienced investor, because you can start with as little as ₹500.
Benefits of Mutual Funds:
- Low entry barrier and easy liquidity
- Diversification reduces individual stock risk
- Managed by SEBI-registered fund houses
- Ideal for long-term wealth creation
PMS vs Mutual Fund: Key Differences
To understand which option might be best for you, let’s compare PMS vs mutual funds across important parameters.
| Feature | Portfolio Management Service (PMS) | Mutual Funds |
|---|---|---|
| Minimum Investment | ₹50 lakhs (as per SEBI) | As low as ₹500 |
| Ownership | Direct ownership of securities | Indirect, via pooled funds |
| Customization | Highly personalized | Standardized portfolio |
| Regulation | SEBI (through PMS regulations) | SEBI (Mutual Fund Regulations) |
| Fees | Higher (management + performance fee) | Lower (expense ratio) |
| Liquidity | Limited | High (easy redemption) |
| Risk | High due to concentrated bets | Moderate due to diversification |
| Taxation | Direct capital gains | Fund-level taxation (depends on type) |
PMS vs. Mutual Funds: Returns and Performance
When evaluating PMS funds in India, it’s important to remember that returns can vary significantly depending on the strategy and market conditions.
Historically, PMS returns have often outperformed mutual funds during bullish markets due to active management and concentrated positions. However, during volatile or bearish markets, the same concentration can lead to higher downside risk.
In contrast, mutual funds tend to offer more stable, consistent returns due to diversification across sectors and stocks.
Thus, the right choice depends on whether you prioritise high potential returns with higher risk or steady growth with controlled volatility.
Which Option Matches Your Risk Profile?
Choosing between PMS and mutual funds largely depends on your risk profile and investment objectives.
- Conservative Investors: Mutual funds are generally safer because of diversification.
- Moderate Risk-Takers: Hybrid mutual funds or balanced advantage funds can offer a middle ground.
- Aggressive Investors / HNIs: PMS might be suitable if you can handle volatility and want personalised management.
Should You Invest in Both PMS and Mutual Funds?
Yes, if your portfolio size and goals allow it, investing in both PMS and mutual funds can be a smart strategy. Here’s why:
- Diversification of strategy: PMS focuses on concentrated bets while mutual funds offer broad diversification.
- Liquidity balance: Mutual funds provide quick liquidity, while PMS builds long-term wealth.
- Tax efficiency: Different tax treatments can optimise your after-tax returns.
If you’re planning your next investment move or want to manage your liquidity better, Fibe can help you stay financially agile. With Fibe’s Instant Personal Loan of up to ₹5 lakhs, you can invest strategically without disturbing your savings.
The process is fast, paperless and entirely digital; just download the Fibe App or visit fibe.in to get started.
FAQs on PMS vs Mutual Funds
1. Is PMS better than mutual funds?
It depends on your investment amount and risk profile. PMS offers higher customisation and potentially better returns, while mutual funds provide easier access and diversification.
2. Should I invest in both stocks and mutual funds?
Yes, you can invest in both if your financial goals, capital and risk tolerance permit. PMS or direct stocks can enhance returns, while mutual funds help stabilise your portfolio.
