MF - Stock - PMS : Which one for you?

 Almost everyone of us start investing small and gradually scale up – as we gain confidence. But some may be wondering whether to stick to one investment option or to invest in multiple ones.

While this decision to spread your investments depends on individuals risk profile, usually when we start investing – it is convenient and affordable to invest through the mutual fund route. Since mutual funds are well regulated by SEBI and managed by professional fund managers – it is the easiest option for any investor. What ever may be your investment duration – be it short term (one month to one year) or medium term (One year to three years) or long term (three years plus) - you have an investment option in mutual funds. This versatility of product range makes it easy to invest.

But in India - direct stock investing preceded mutual fund. Though the MF concept was born in 1960’s – it gained popularity only in the last twenty five years. But stock investing has been in practice even in pre independence era. And many investors have created huge wealth by investing directly in stocks – gaining both by share price appreciation and dividend income. Almost all investors get into direct stock investing dreaming that they will be one such lucky investor and create huge wealth. But majority investors had burned their fingers by investing on shortcuts, tips and not following up with their investments.

As a result – investors started looking for an investment option which is relatively easier to invest – without much efforts. Many investors wanted to invest small amount. And some wanted to invest regularly – like monthly basis. All these expectations were met by Mutual funds. As a result - unlike in 1990’s, in last 10 years or so - majority of investors – including small investors - have made money by investing through mutual funds. While the returns could have varied, we need to appreciate - something is better than nothing.

Does that mean stock investing is not at all required and only mutual funds would do? And where does PMS fit in the picture.

If you know that a company will do well and you have the time and passion to keep track of the company – then direct stock investing can give best results. Kindly note – the size of investment does not matter here. Even with small capital – you can do direct stock investing provided you have the time and passion.

Most investors do not have the time to keep track of the companies they invest in. For them mutual funds are the ideal choice. You benefit from fund manager’s expertise, diversification, low cost of management etc. And again - size of investment does not matter. Even small capital would do. And you can even go for regular investments like SIP’s.

And even for those who are passionate about investing in stocks, how many companies can they keep track?. May be 5 or 10 or 20. Not beyond that. And the biggest challenge for most investors is not identifying and investing – but the exit part. Many of us just buy it and forget it. And when the investment portfolio value grows in size – the number of stocks we hold also goes up. At some point it becomes difficult to keep track of all the stocks. In such situation – Portfolio Management Services (PMS) can make sense. While a mutual fund is also managed by a fund manager – there are differences between both. We had published the similarities and differences in our MONTHLY MEMO way back in Aug 2023. Publishing the table for better clarity.

And we need to keep in mind – not all PMS fund managers do well. Some of them are lousy. We need to identify talent and invest in them. Some of them may have high churn ratio. But if they deliver results – investing in PMS can make sense. For instance – while the index return of last one year has been pathetic – some PMS have delivered a return close to 15%. That’s pretty good. Attached below is actual performance of one such PMS.

To conclude –

• If you can keep track of the stocks you invest – go for direct stock investing.
• If not – then mutual fund is a better option.
• If you have sizable portfolio (Rs.2 Crore Plus) – then you can slice a part of it and invest in PMS. But keep in mind your risk profile before investing. And the past returns are not guarantee of future returns.

Should you invest in SECTOR Funds ?

Among mutual funds - equity mutual funds are risky and volatile. Among them Sector funds and thematic funds are the riskiest. Hence most investors invest in relatively safer funds like large cap, midcap etc. 

Normally equity funds invest in multiple sectors as per the fund mandate and at the discretion of the fund manager. But if a fund invests only in one sector - like Information technology or Banking stocks or pharma - they are called SECTOR FUNDS. And if they invest in a theme - like Infrastructure, consumption etc - they are classified as THEME FUNDS.

Though investing in a sector fund or theme fund is risky - they are not as risky as investing directly in stocks - since the fund manager invest in 20 to 30 stocks based on his research and analysis. As a result diversification helps investors in managing risk better. For those investors who are venturing in stock market where the probability of making profit hinges on individual stocks - theme fund or sector fund could be a better bet.

And in many occasion we paint with same brush. For instance - we classify all pharma company as one. But in reality there are many sub categories in pharma - domestic formulation, export market, CDMO, Hospital and diagnostics. And in each categories you have a dozen or two stocks. In a mutual fund, the fund manager is the best person to decide on which ones to invest. All we need to do is identify the sectors / themes that we like and invest in the best mutual fund in the category.

And the proof is in the pudding. In the last 2 years, when broader market did not do well - Pharma and Healthcare sector has done pretty well. While your normal equity mutual fund would also have invested in this sector - other sectors would have dragged the returns. Hence if you want to reap the full benefit of a sector - you can consider investing in relevant sectoral funds keeping in mind the risk - reward payoff. But keep in mind - all funds in the same sector are not equal. Those who got their calls right would be best performing and you need to identify them and invest.

Investing in SIP's through market cycles...

"Think big, think fast, think ahead. Ideas are no one's monopoly." ~ Dhirubai Ambani

We can replace 'Ideas' with 'Knowledge'. And more and more investment managers come in... they debug complex concepts in simpler fashion. And most of them explain those there were not done earlier. In this knowledge economy - that is the BIGGEST Benefit. You can gain out of others wisdom. And the new entrants in to the industry - try to impress the investing public more than the older ones for obvious reasons.

The new kid on the mutual fund industry is https://capitalmindmf.com/. And I enjoy reading their newsletter by email. In their recent newsletter dated 1st May 2026, I was stunned with their write up on - "You want the bad years now - not later."

It was so impressive - thought of summing up the same for everyone's benefit.

In this article they discuss about the impact of investing in two schemes which has delivered end to end - same CAGR - 14% - over 10 years. The only difference is - in 1st scheme - 1st 5 years the NAV has risen steadily and flattered. In the 2nd scheme - it the the other way around - 1st 5 years has been bad and next 5 years has been good.

Now the scenario testing:

1) For a One time investor - the end result in both funds would be the same : 14%

2) But for SIP - the results are different. For SIP - B, when the 1st 5 years were bad - and NAV's were obviously low - each SIP investment would have accumulated more units. 

3) As a result - SIP started during BAD years gave better returns than those started during Good years.

But in reality - many investors worry / hold back investing during bad years. And worse - some of them stop their SIP's saying that the returns are not great only to restart when green shoots show up.

So the writing is clear on the wall - continue your SIP's in GOOD FUNDS irrespective of market conditions. Over a 10 year period - you never know when good or bad years come up. Infact, they alternate. As seen in either of scenario above - you make returns in both scenarios. But you can be lucky if you start your investments during tough times and tough times last for sometime - you hit a JACKPOT.

Ripple effect of Oil Crisis:

In life, we take many things for granted. For instance – water resource. We make a borewell and keep consuming it and sometimes wasting it. Only when the supply gets disrupted, we understand its value. We scramble to get things done – like ‘buying’ water at a cost.

Right now, the ongoing Oil Crisis is one such disruption. When unprecedent things happen, when things go out of control, and when things may take years to normalize – we understand our limitations. That exposes the fragility of economy.

While most of us may be aware of the way the US-Iran war unfolded, following is a simple flow of events to understand the ripple effect:

·       28^th Feb 2026 : US-Israel launch: Operation EPIC FURY, killing Iran’s supreme leader  Ali Khamenei, many of his family members and senior officials of the regime.

·       Iran's response was calculated. Rather than engage in a conventional war it could not win, Tehran weaponised geography. It deployed drones, missiles, and naval mines to seal the Strait of Hormuz, and then it began hitting energy infrastructure across the Gulf.

·       Within the first week, Iran’s drones struck Qatar's Ras Laffan LNG facility- responsible for nearly 20 percent of the world's liquefied natural gas exports. Saudi Arabia's Ras Tanura refinery, the kingdom's largest, was closed after a fire caused by intercepted drone debris. The UAE's ADNOC shut refineries. Kuwait Petroleum Corporation and Bahrain's Bapco followed. Gulf countries have been forced to cut at least 10 million barrels per day of production.

·       On 18^th March, Israel hit Iran's South Pars gas field - the single largest natural gas deposit on earth, shared between Iran and Qatar. Iran retaliated within hours, launching missiles at Qatar's Ras Laffan again, causing what QatarEnergy described as extensive damage. Iran also targeted UAE’s Habshan gas complex, the Bab oilfield, LNG facilities in Kuwait, Bahrain and Saudi.

·       In total, six countries in the Gulf have now had their energy infrastructure directly attacked or shut down: Iran, Qatar, Saudi Arabia, the UAE, Kuwait, and Bahrain.

·       Strait of Hormuz: Before 28^th Feb, 100 oil tankers crossed every day. In past 3 weeks a total of 21 tankers have managed to cross.

Global impact:

·       World consumes about 105 million barrels per day.
·       As a result of war, Oil supply has fallen by 8 million barrels per day. That 7.5%.
·       So far, Asian LNG spot prices more than doubled to over 25 dollars per million BTU. European natural gas futures rose over 50 percent. Jet fuel prices are up 83 percent, according to the International Air Transport Association. Urea fertiliser prices have risen 35 percent. Helium, essential for semiconductor manufacturing, has doubled in price since Qatar, the source of a third of the world's helium supply, shut production.
·       More than 30 countries are affected. South Korea imposed fuel caps for the first time in nearly three decades. Japan began releasing oil from its national reserves. Bangladesh stationed troops at oil depots and closed universities to conserve fuel. The Philippines moved government offices to a four-day work week. Nepal started rationing cooking gas. Vietnam has less than 20 days of oil reserves remaining. Thailand's tourist arrivals fell 9 percent in the first week of March alone, with hotels reporting occupancy as low as 10 percent. Smaller energy importing economies, including the Philippines, Pakistan, and Sri Lanka, would face the sharpest macroeconomic damage, as inflation, currency depreciation, and widening deficits hit all at once.

Impact on India:

·       India imports 90% of its Crude oil.
·       50% of this and 75% of LNG pass through strait of Hormuz.
·        22 Indian flagged vessels carrying 2.2 million metric tonnes of critical energy cargo, including LPG, LNG, and crude oil, were stranded in the strait as of 18 March. Only two vessels each carrying 46,000 metric tonnes of LNG managed to reach India - that too in exchange of emergency medicines etc.
·       With rising crude price, our current account deficit spirals up. A US$1 rise in crude oil prices increases India’s annual import bill by approximately US$1.5 billion to US$2 billion (approx. ₹12,000–₹16,000 crore). This boosts the Current Account Deficit (CAD), fuels inflation, weakens the Rupee, and negatively impacts downstream oil marketing companies.
·       Agricultural exports to Gulf countries, including rice and bananas, have been severely disrupted.
·       Around 93 lakh Indians work in the Middle East, and 30 percent of India's total remittances (over 50 billion dollars annually) flows from the region.

What Next ? :

With majority of IRAN’s top brass wiped out, many expect the war to come to an end soon. But life will not be the same again.
·       There could be sporadic instances of terror threats / attacks across the globe – increasing the cost of defense and security checks. This could affect normalcy.
·       Oil and LNG production may not resume immediately. It depends on field's age and the nature of the shutdown. LNG facilities involve sub-zero cryogenic equipment that must be restarted gradually to avoid thermal shock and damage.
In 1973, the Arab oil embargo was a political tool that could be lifted with a political decision. In 2026, even after a ceasefire, the physical, financial, and logistical wreckage will take far longer to clear.

What the US thought could be a cake walk like the way they handled Venezuelan crisis could turn out to be a costly affair – affecting not just them, but the entire world. They would not have imagined the kind of retaliation from Iran. They would not have imagined that their key NATO allies not aligning with them. And worse what should have been a Israel-Iran war has turned out to be a Arab-Iran war. As Saudi Arabia's foreign minister said on 19 March: the trust that held the Gulf's energy system together has been completely shattered. The ripple effect could take longer than you imagine to normalize. And what was taken for granted - be it oil or peace - has become a luxury now.

Things to do when Market falls:

Investors like to invest when there is visibility and clarity. They invest more when the returns have been good. But the 'good' returns they see are out of the investments made when markets have been bad. 

• And investors like to invest when they have money. But such opportunity (market fall) happens occassionally. When you are flushed with money - keep it aside and invest when such opportunity strikes. 
• Having said that - it is not that easy to invest when market falls. Often we wait for clarity to emerge... and miss the opportunity. Hence invest gradually when market keeps falling. And it is an art to stretch your capital and invest to the maximum possible downcycle. If you have exhausted the reserved funds - do search for some more, squeeze out and invest.
• More important - do not look for consensus to invest. The person next to you may scare you. Close your ears and keep investing. 
• Some investors review their existing portfolio during market fall and feel disheartened to see the pathetic returns. Donot do that. When broader market falls - everything will fall. Your portfolio alone may not be insulated. You an earmark those you would like to knock off - but do that when markets have recovered.
• Spreading your investments across industries, across assets can help you reduce volatility and improve consistency. Experts say, the ideal ratio could be 70% Equity, 15% Debt and 15% Gold. 
• Investors normally like to invest only in assets which give THE BEST returns. So they switch / skew their portfolio - only to get hit when market reverses. Better to maintain a balance.

The message is simple - if you want good returns in equity - you need to take that bit of risk. No shortcuts there. Current IRAN War or rather the last 18 months market consolidation is one such opportunity. GRAB IT. Get it touch for assistance.

Valuation Ratios

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Market Rotation: Winners and Losers

 

Gold outlook and Portfolio allocation:

 

Understanding Equity Mutual Funds:

 

Neutral Way of Investing

 

Most investors would have been in a dilemma when they decide to invest. Whether to invest today or bit later. Should I invest one shot or do a SIP. But the returns they would have made is known only in hindsight. If it is good – they could claim they made right decision and if is bad they blame it on the market.

For instance, Sensex was 85930 on 26^th Sept 2024. And it is 85706 on 28^th Nov 2025. In between, it touched as low as 71425 on 7^th April 2025. While it is a 0% return over 14 months, it is a 20% return from the bottom of the market. Though the return from the bottom looks attractive, the point to point return  of 0% over a one year period is hard to stomach – for most investors. A one time investment in most mutual funds delivered bit better returns, it is far lower than investors expectations - after few years of great returns.

The period of nil returns or low returns are typically years of consolidation. This usually happen after few years of great returns. Incidentally the interest to invest is high after such years. While there is nothing wrong with expectations, it is better to be realistic and take a cautious approach to investing.

For instance, a monthly SIP would have fetched us far better return (if not the best return) than the NIL return – since you would have invested through the ups and downs of the market. At the end… it is better to get something rather than nothing. Though boring, it is better to invest in neutral way.