Why do businessmen need to go for Portfolio Management Services?

Running your own business is not easy. Definitely not!

But more difficult is wealth creation.

You may run a business for many years, as an entrepreneur, you may grow your business and you may REALLY WORK HARD towards creating a great product or service, but ultimately what matters is, are you creating wealth, enough wealth to support your aspirations, and the aspirations of your loved ones?

Though, you can use your business to grow your wealth, “solely depending on your business” is like putting all your eggs in the same basket, to use the age-old adage.

This is definitely not an attempt to dissuade you from doing your business and using it as a means to create wealth. You should definitely devote your time and resources to your business.

Our only advice is, if you want to create true, sustainable wealth, you shouldn’t depend on a single source of wealth – your business.

A business, after all, is subject to various conditions, including

  • Your ability to plan and plan ahead
  • Your ability to make timely changes according to competition and market conditions
  • Your ability to innovate
  • Your ability to manage your finances
  • Your ability to recognize opportunities
  • Market conditions
  • The efficiency of your workforce
  • Your suppliers
  • Your customers and clients
  • Government policies
  • Global competition
  • and a slew of controllable and uncontrollable factors

The point is, when you are running your business and when your business is the sole source of your wealth or income, you can never be too sure. Besides, a business requires sweat and blood, literally. And even then, you’re not sure whether your sweat and blood are going to reap benefits or not.

When your business goes down, it takes you down with it, in most of the cases. Families are ruined. Lives are wasted. Fortunes go down the drain. I am sure if you look around, you would be able to find such cases.

There is another way of creating wealth that doesn’t require your full-time focus and still, can give you great results.

Businessmen need to work with Portfolio Management Services

Doesn’t it mean investing in the stock market or the share market, you may wonder? Isn’t it way too risky to put your hard-earned money into something as good as betting?

Unfortunately, this is a misperception that stops many entrepreneurs like you from creating multiple sources of wealth, and consequently, many have to go through financial ruins simply because they depend on a single source.

Investing in portfolios (share market, to use a simple term) is same as investing in a business, with the only difference (and quite a big difference) that you don’t need to actively get involved in the nitty-gritty of running that business. You simply put your money. When the business grows, your money grows.

Investing in Portfolio management services is investing in great businesses which are run by great management. Which means, the MDs and CEOs of great companies are working hard to grow their own business in which you have also a share. Investing in stocks is not just about stock price going up or down. It means you are now a part of their business. A part owner in their business.

You may think that the other way must also be true – when the business goes down, so does the value of your investment.

Yes, that might be the case if you dabble with different portfolios on your own.

Let’s look at the stock market’s track record on protecting investor’s capital?? 

We can see the rolling returns of Sensex investors have generated in past years. Sensex is the Index of Bombay Stock Exchange. It consists of 30 top companies of India on the basis of market capitalization. Rolling returns means, investing on any random date and then taking 1 year / 3 / 5 years from that date, so that the results obtained are absolutely unbiased.

*source: Bloomberg. Data as of July 31,2018.

We can see in last 1 years Sensex was able to generate positive returns only 80 times and 20 times investors lost their money.

In the span of 3 years the possibility of profits rises to 96 and in the span of 5 years 98 out of 100 trades gave positive returns when someone invested in Sensex.

As you move your investment horizon from 1Year to 5 Years  

  1. Probability of losses reduces from 20 % to 2%.
  2. Minimum loss also reduces from -56% to -2.5%
  3. But maximum returns drop from 110% to 42%
  4. The average returns drop from 18.7% to 12.45
  5. Inflation beating probability rises from 71% to 74%

But when you work with a Portfolio Management Service, your money is in much more safe hands. You can compare a fund manager with a pilot. Are all airlines 100% safe? No. But they are so safe that we don’t think about the “safety” factor before we book a flight. Do we? So trusting a portfolio manager in a PMS is like trusting a pilot on your life.

Before elucidating further, let’s see an example of how you can grow your wealth by strategically investing in stable portfolios normally recommended by portfolio management services.

The case of HDFC Bank.

A well-known bank these days, HDFC Bank was started by Mr. Hansmukh Parekh in 1994 with a capital of roughly Rs 50 crore and today the bank’s total Market Cap is …………….. crore.

Who wouldn’t like to be a part of such a big growth-oriented business (banking is a business, after all).

Good news is, you can easily become a part of HDFC. You don’t have to be one of the owners. You don’t have to be running the company. You just need to invest in it and be a share holder.

HDFC is a publicly traded company, which means, you can buy its shares. The company has issued stocks that are traded on a daily basis in the Indian stock market. Going by the current rates, if you can spend Rs. 50,000 you can buy approximately 25 shares of HDFC Bank. This means you own a small portion of the bank. When the bank makes a profit, it will share the dividend with you according to your 25 shares.

If you no longer want to own these 25 shares and the price of these shares has increased (say, Rs. 60,000 for the same 25 shares) you can sell them for a profit.

Now, HDFC Bank is a very stable company. You don’t need a portfolio management service to tell you that your money should be safe if you invest in the bank. But the point here is, it has grown from 50 crores to 5 Lac crores….does it still have to potential to grow? We as laymen can not figure that out. It’s a professional’s job and that’s the reason you need to trust the fund manager of a PMS service.

Can you say the same about your business?

Again, we’re not casting aspersions on your ability to grow your business four to five times, or even more for that matter, we’re just saying, is there a surety and can we grow our business 100 times or maybe 1000 times? Do you see your wealth of 25 lakhs  turning into 25 crores in the next 10-15 years?

With an investment in Portfolio management services, you have a really high probability.

This, is the power of investing strategically with the help of a well-established, competent portfolio management service. As a businessman, you must explore the options of creating wealth by closely working with portfolio management services.

Why do experienced portfolio management services have the capacity to grow your wealth consistently, or even quickly?

First of all, they have a big research team working for them. This is a job they do. They make their livelihood by studying stocks very closely, which ultimately increases your wealth.

They routinely visit industrial units, meet the management. They scour through thousands of financial reports on weekly basis. They are constantly talking with industry leaders. They use advanced software and analytical tools for financial analysis. They subscribe to very expensive financial reports that are not easy to get. They attend conferences and workshops to augment their knowledge. They constantly update themselves. They have databases of thousands of companies and their performances, and these databases are being updated in real-time. They do much more..!

They are already making huge profits for individuals and financial institutions. People pay them for their job. If they didn’t make profits, they wouldn’t survive as portfolio management services. They charge a fee for managing your portfolio and the fee is based on the value of your portfolio. More the value of your portfolio, the more fee they get. And like you, they have thousands of customers. Which means, their motivation and incentive to grow your money is even more than you.

 List of PMS services in India

There are lot of companies providing PMS services in India. Such as Aditya Birla Portfolio management services, Porinju, Sundaram , Shepherd’s Hill, ICICI prudential Portfolio Management Services, Motilal Oswal PMS services, Geojit Portfolio management services and the list goes on….The fee, returns and risk, varies from AMC (asset management company) to AMC. Call us to know more about PMS services in India. We will give you best advice based on our knowledge and experience.

Investing with Portfolio Management Services helps you reduce your financial risks

One of the biggest benefits of investing with portfolio management services is that it reduces your financial risks. When you put all your money into your own business, as mentioned above, if your business goes down (we definitely don’t want that or wish that), it takes you down.

But when you have invested your money with a portfolio management service, a big chunk of your money isn’t just in safe hands, it is well diversified in 15-20 companies and is also growing.

If you invest in portfolio management services with growth strategy, your money grows with them. Your wealth is not dependent on your own business. It is constantly increasing.

Portfolio management services don’t bother you with individual stocks once you have invested your money with them. On their own, they keep shuffling your investment from one stock to another or shift proportions of investment within their existing stocks. Their sole purpose is to grow your wealth (remember we talked about their commission…?). Wealth doesn’t discriminate in asset class or stocks for that matter. What matters is that you create wealth.

Do you have to pay a fee to your selected portfolio management service?

A small fee, yes, compared to the amount of money the portfolio management service makes you. They need to survive and grow in order to be able to provide stellar services. In fact, the amount of money that they will be making for you, the fee that you pay to them will be minuscule in comparison.

A good way to invest with a portfolio management service is to invest for the long term. Don’t expect quick profits because lots of research and thinking goes into strategically placing your money into various stocks and once it is put there, it is not feasible to take it out quickly. So, invest with lots of patience. Unfortunately, there is no substitute to the time factor in the process of creating wealth.

Did you find the above thoughts intriguing? Want to know more about how a portfolio management service can help you grow your wealth? Feel free to contact.

Disclaimer: In this article we have used HDFC Bank as an example. Hence, for any decision that you make regarding investing in this bank based on our article, we cannot be held responsible. Though, we would like to say that we have personally invested in HDFC bank and it has really made us happy. Also, we don’t intend to say that you make investing with portfolio management services your soul source of wealth creation. Please work hard with your business as you always have.

 

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