PMS vs mutual funds: costs, tax and who each suits
Aeterna Wealth · figures from our fund data, updated 5 Nov 2026
A PMS holds 15 to 30 stocks in your own demat account with a ₹50 lakh minimum; a mutual fund pools money into a diversified portfolio from ₹100 a month. PMS can suit large portfolios that want a concentrated strategy, but it usually costs more, every trade is taxed in your hands, and results depend heavily on one manager.
Side by side
- Minimum: PMS ₹50 lakh (SEBI); mutual funds from about ₹100–500 a month.
- Ownership: PMS shares sit in your demat; a mutual fund gives you units.
- Concentration: PMS often 15–30 stocks; diversified funds usually 40–80.
- Tax: PMS trades are taxed in your hands as they happen; a fund's internal trades are not taxed until you sell units.
- Fees: PMS fixed fees often 1.5–2.5% a year, or a profit share above a hurdle; equity fund expense ratios are capped by SEBI.
The cost question
Fees compound. On ₹50 lakh over 10 years at an assumed 13% before fees, a 2.5% yearly fee leaves about ₹19.6 lakh less than a 1% fee. A PMS has to earn that back to be worth it.
How to decide
- Under ₹50 lakh to invest: mutual funds.
- Large portfolio with a diversified core already: a PMS can add a concentrated strategy alongside.
- Compare a PMS on its reported returns against a standard benchmark, its worst periods and its fees after tax, not on its best year.
Common questions
Is PMS better than mutual funds?
Not by default. It is more concentrated and usually costs more; it is worth it only if it adds return or diversification after costs and tax.
What is the minimum for PMS?
₹50 lakh, in cash or eligible shares.
Can I exit a PMS any time?
Yes; SEBI caps exit loads at 3% in the first year, 2% in the second and 1% in the third.
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- Tax on mutual fund gains in 2025-26: LTCG, STCG and how to save
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General information, not investment or tax advice for your situation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.