- Wealth PMS (50L+)
The Securities and Exchange Board of India, the market regulator, has upped the minimum investment in Portfolio Management Services (PMS) to Rs. 25 lakh. The earlier minimum was Rs. 5 lakh. This applies immediately for new clients; for existing ones, additional investments need to top up to at least Rs. 25 lakh.
Many brokerages and independent managers offer PMS products, where a manager trades the stock markets, and the Rs. 5 lakh minimum was supposed to deter people who couldn’t really afford to lose that money. (I’m not sure how the higher limit helps, but I suppose it does deter the less well-to-do from losing their shirts)
The unfortunate problem with PMS products has been their overall misuse. There are good PMS products, mind you, and many are offered by smaller, boutique investment advisors; these are usually not available to the masses (reference-only). But the vast majority of what you hear are abused in many ways:
While the Rs. 25 lakh minimum doesn’t do much about the above abuse, it helps raise the bar – hopefully, people at that level will read more about the abuse and ask tough questions before they invest. However, noting how high-barrier investment products have been abused around the world (like a Norwegian town being sold US subprime securities), I wouldn’t hold my breath.