Portfolio Management Services

Portfolio management is not just about choosing the right stocks or funds. It is about using a careful, research-based plan that matches your long-term goals. For Indian investors looking to build capital, it is important to understand active and passive portfolio management. This applies to PMS investments, mutual funds, and direct equity.

As India’s capital markets grow, investors want more control. Choosing between active and passive strategies is important. Finding the right balance can help you grow your wealth effectively.

What Is Portfolio Management? A Strategic Overview

Portfolio management is the structured process of managing investments across asset classes to meet specific financial objectives. It includes asset allocation, risk management, performance tracking, and ongoing rebalancing.

You can manage your investments through a professional fund manager or on your own using mutual funds or ETFs. A good portfolio strategy can help you focus on long-term growth instead of short-term market noise.

There are two dominant approaches: active and passive. Let’s unpack both through an Indian investor lens.

Active Portfolio Management: Navigating the Market with Expertise

In an active portfolio, a fund manager picks securities. They decide when to buy or sell. They also adjust allocations based on current investment analysis.

It’s great for investors looking for better returns. This is especially true in areas where India has gaps or inefficiencies. These areas include small-cap stocks, turnaround stories, and niche themes like ESG or a manufacturing comeback and much more depending on the fund managers’ views and investment strategies.

Key Characteristics:

• Manager-led decision making
• Tactical shifts based on research, macro trends, or earnings data
• Used heavily in PMS investment strategies
• Higher expense ratios due to active involvement

Benefits:

• Potential to outperform benchmarks
• Flexibility to avoid underperforming sectors
• Responsive to market volatility

Considerations:

• Performance heavily depends on the manager’s skill
• Higher costs (fees, transaction costs)
• Possibility of underperformance

As long as market inefficiencies still exist, active strategies remain appealing to investors. The active investing world-view is that the markets are less efficient and that they can be outperformed over a period of time. As a developing market, active investors stand a good chance of generating outstanding returns.

Passive Portfolio Management: Letting the Market Work for You

Passive investing means creating a portfolio that copies a market index. You can use index funds or ETFs, like the Nifty 50 or Sensex, to achieve this. There’s no frequent buying or selling. The goal is to match, not beat, the market.

As India’s ETF market deepens, passive investing is becoming increasingly accessible, especially for investors looking for simplicity, transparency, and cost efficiency.

Key Characteristics:

• Tracks benchmark indices
• Minimal trading activity
• Typically used for broad-based exposure or asset allocation

Benefits:

• Extremely low cost
• No dependency on fund manager’s judgment
• Transparent and predictable performance

Considerations:

• No chance of outperformance
• Offers no downside protection in bear markets
• Blind allocation, regardless of fundamentals

High-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) need a core portfolio of mutual funds. This is important for their financial management. Passive strategies often serve as the base of a multi-layered wealth plan.

Hybrid Approach: Building Momentum with Balance

For affluent investors, the conversation isn’t always active vs passive is often about how much of each.

Strategic Allocation Approach:

1. Core allocation (50–70%): Passive instruments (e.g., Nifty index funds, Bharat Bond ETFs)
2. Satellite allocation (30–50%): Active exposure through PMS, sector funds, or tactical themes

This hybrid approach helps investors achieve benchmark growth. It uses expert strategies to target alpha generation during key opportunities. These opportunities include capex resurgence, energy transition, and digital transformation themes.

At FYERS, we believe this blended strategy is key to building trust and consistency in your wealth journey.

Indian Market Realities: Active Still Dominates, But Trends Are Shifting

1. By 2025, fund managers will still actively manage more than 82% of equity AUM in India. This shows that Indian investors trust expert judgment. This is especially true in volatile or high-growth areas.
2. That said, passive AUM has grown 10x in the last 5 years, indicating rising interest in cost-effective index solutions.
3. Large-cap stocks and bonds are getting more passive investment. In contrast, mid-cap stocks, thematic investments, and alternatives are still active areas.

Indian investors are slowly shifting to goal-linked investing. This means they mix passive strategies for stability with active strategies for opportunities. As of this date, FYERS’ portfolio management services provides active investment management and may use ETFs or passive strategies from time to time as part of the fund management process to enhance returns using debt ETFs during 'risk-off' phases. However, the the investment style is active and leveraging emerging themes in the economy.

What Should Drive Your Strategy? Key Investor Considerations

Active Management

• Objective: Try to beat the market (generate alpha)
• Risk Appetite: Medium to High
• Costs: Higher (fund manager fees, more transactions)
• Customisation: High (via PMS or focused funds)
• Best For: Less efficient markets or niche opportunities

Passive Management

• Objective: Match the market benchmark (stability)
• Risk Appetite: Low to Moderate
• Costs: Lower (expense ratios usually < 1%)
• Customisation: Low (index-based approach)
• Best For: Large-cap and efficient markets

Conclusion:

Choosing between active and passive portfolio management is not just a tactical choice. It is a strategic decision about how you want to grow, protect, and increase your wealth.

At FYERS, we support a disciplined approach that aligns with goals. We combine low-cost index solutions with strong active strategies when needed. A good portfolio strategy is important for your finances. This is true whether you are making your first crore or managing family wealth.

And momentum? That comes from choosing a philosophy that fits you, not the market.