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Mutual Funds Vs AIF Vs PMS: Where Should You Invest? | Incredible Things

When it comes to investment, there are numerous options to pick from. However, which one is best depends on what the requirements of an investor are. Whether the investor is looking for top mutual funds or something else depends on what is most compatible with him in his specific financial position. Three of the investment options which can be looked upon prior to making an investment decision are Portfolio Management Services (PMS), Alternative Investment Funds and Mutual Funds. A brief knowledge about each of these three will help an investor to see which investment option would be most suitable to him.

What Is Mutual Fund?

A mutual fund is basically a common pool of money where various investors deposit their capital in return of which they get fund units. The invested money can be used for stocks, gold, bonds and other such assets.

In mutual funds, the growth is steady with small investments but requires patience.

Categories Of Mutual Funds:

Some of the common categories of mutual funds are

  • Equity Funds: Funds investing only in stocks or other such equity investments.
  • Debt Funds: Funds investing in money instruments which are fixed.
  • Hybrid Funds: Funds which involves the aspects of both equity and debt funds.

Benefits of Mutual Fund

The advantages of best mutual funds are as follows:

  • Effective Portfolio Management: A professional portfolio manager manages the investor’s funds for purchasing and selling of bonds, stocks etc. Portfolio manager’s task is to provide professional service to the investor.
  • Ease Of Access: Mutual funds are simple to understand and the fund units easy to buy.
  • Diversification: Best mutual funds provide risk reduction as they usually employ the method of diversifying the investment into many different companies. This prevents the funds’ dependence on the performance of any one particular company.

What Is AIF?

Alternative Investment Funds are designed with the end of investing in private equity funds, hedge funds or in real estate. AIF basically refers to a form of investment which differs from the convention mode of investment in securities, bonds etc.

Categories Of AIF

There are 3 categories of AIF.


  • Category I: It is desirable for investment in startups or social venture funds. They are economically well suited for the regulators or government.
  • Category II: All the funds which are not described under category I and III falls under this category. It comprises of the funds investing in private equities. This category is not subjected to any concession or incentive from the government.
  • Category III: Funds undertaking complex trading strategies fall under this category. Hedge Funds being a prime example.

Benefits Of AIF

AIF provides the following benefits to the investors

  • Large Corpus: AIF has a pool of investment and hence provides a large corpus which eventually benefits the investors.
  • Personalized: AIF can be customized on the basis of the requirements of the investor regarding how to deploy the investment strategy in a particular sector or in which assets to invest.
  • Fund Raising Potential: AIF can raise funds from various sources or investors whether they happen to be Indian, NRI, or a foreigner.

What Is PMS?

Portfolio Management Services offer a customized investment portfolio which is tailor-made to suit the need of a particular investor in order to purchase or sell equities. The chief objective of PMS is to provide higher returns and create wealth. The fund manager is authorized as the power of attorney on behalf of the investor to effectively manage the investor’s Demat account. The key thing to note about PMS is that the minimum investment is Rs. 50 lakh. PMS is very much like Mutual Funds, with the key difference being that here the investor owns the asset whereas in mutual funds he only has the fund units of the assets.

Types Of PMS

There are two types of PMS

  • Discretionary PMS: In the discretionary form, the fund manager has the power to take decisions on behalf of the investor.
  • Non-discretionary PMS: In non-discretionary PMS, the fund manager’s task is to only provide suggestions and tips to the investor. It is with the investor in whom the executive power lies.

Benefits Of PMS

The benefits of PMS are several. Some of them are given below:

  • Personalized Portfolio: It is designed in such a way so as to meet the specific requirements of each individual investor.
  • Professionally Managed: Investors are assigned portfolio managers who effectively manage the investor’s Demat Account.
  • Active Monitoring: The portfolio can be tracked or monitored easily to keep track of its performance with the goal of improving them.

Depending on the suitability of the investors, they can pick any from the following. However, both AIF and PMS require a relatively higher amount of investment than compared to mutual funds. The key objective, therefore, depends on what the goal of the investor is. Even the best mutual fund would require patience and a rate of returns which is not as high as either AIF or PMS. Though the risk involved in mutual funds is much lower. Hence, if one is looking for stable returns after a decade or so on their investment with marginal risks and with lower investment payment he should go for mutual funds. There are many best mutual funds offer for the taking.

 

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