Bishoping The Horse – PMS Style


If you have a few lakhs lying round,then be certain that the PMS guys will definitely seek you out.Most of them are simply not worth your time or money.But that’s not to say that sifting through them you might not find the occasional gem.

So really,its all about being aware of the common ways in which the portfolio management services (PMS) provided are made to look way better value than they are, akin to bishoping horses bound for sale.

So here’s the list of stratagems commonly resorted to. Fairly long,but by no means comprehensive.Please feel free to use the comments section to add to this list:

1.Simplest of all ,gross portfolio returns are reported, with nary a word about fees and expenses and the GST. This might show the investment managers to be investment geniuses.But might leave you with underwhelming net results.Much ado about nothing really and you might have done better simply sticking to less sexy financial products.

2.Because just so often,things look so much greater in theory than in actual practice,you find Jacks talking up model portfolio returns even as they remain rather quiet about actual portfolio returns.

3.Just as diamantaires send their diamonds to the labs likely to give them the best grades,PMS literature speaks of returns in terms of IRR, TWRR, simple average, etc.Whatever looks like the better figure.And as there is no standardized method for calculating returns,you need to do your own calculations to compare various PMS offers.

4. Another nifty trick is to inflate returns by actualizing partial periods.

5.Then there is the trick of omitting the cash component in computing returns thereby erasing the drag that cash exerts on returns.

6.Then there are portfolio managers who include in their firm’s performance, the performance which was achieved either before receipt of PMS licence or the performance of their proprietary account/ portfolio.

7.Then there are chaps selectively disclosing their portfolio, getting the same audited and showing that as the returns of the firm.

8.Additionally there is the dodge of ignoring withdrawn portfolios and thus reporting a return which suffers from ‘survivorship bias’.Obviously those clients experiencing stellar returns were not exclusively the the first to leave.

9.Then there is the little trick of not bringing up benchmarks that are inconvenient or simply changing them to the more convenient ones.

10.Another trick is not expensing out upfront fees and set-up costs but reducing them from your capital contribution.

11. Then performance fees are calculated after taking only realized gains into consideration and deliberately omitting unrealized losses

12.Some fail to widely publicize important factors such as a change in the identity of the fund manager and change in the investment strategy .

13.And many don’t provide the standard deviation figure of their portfolio when reporting performance. That is for you to calculate and figure out if you are cool with such divergence from the returns being touted to sign you up.

PMS products are supposedly for the savvier investor than the general mutual fund investor.So best you be savvy and do your own math and due diligence.

Your Rights As A Credit Card User

wealthymattersThe Banking Codes and Standards Board of India (BCSI) has prescribed self regulatory norms which credit card issuers have to follow while dealing with  their customers.So know your rights and insist on good service from your credit card provider.In case of need you can lodge your grievance with the Banking Ombudsman.

Here are the details of these BCSI  norms:

The credit card provider is expected to give you complete details of the fees, interest charges, billing methodology, penalties, renewal and termination procedures and also provide you with a booklet giving all these details. A copy of the `Most Important Terms and Conditions’ has to be given at the time of application to the customer.

Yes or No
Once the customer has shown interest in applying or has already applied for a credit card, it is the duty of the provider to clearly state in how many days he/she will  know whether their application has been accepted or rejected. Read more of this post

Decoding your CIBIL CIR

wealthymatters.comIf you have just bought your CIBIL credit report and need some help understanding it or if you are considering forking out for one and want to know what you will get,the following write up is for you:

Here is the information found on a CIBIL CIR:

Payment history

Days Past Due (DPD) appears in the account(s) section of your CIR. It appears with one other piece of information — the month and year of payment. DPD indicates by how many days a payment on that account is late that month. Anything other than ‘000’ is considered negative by a lender. Up to 36 months of this payment history (with the most recent month displayed first) are provided in this section. Read more of this post

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