Stock Redemption in PMS – A Unique Advantage for Investors
One of the unique benefits of investing through a Portfolio Management Service (PMS) is the option of Stock Redemption.
Unlike most investment products, where you receive your money only in cash when you redeem, a PMS investor can, subject to the PMS agreement and applicable regulations, choose to receive the underlying shares held in the portfolio instead of selling them.
A Simple Illustration
Suppose your PMS portfolio is worth ₹1 crore and consists of:
- HDFC Bank – ₹30 lakh
- Infosys – ₹25 lakh
- Reliance Industries – ₹20 lakh
- TCS – ₹15 lakh
- Cash – ₹10 lakh
Instead of redeeming the portfolio and receiving ₹1 crore in cash, you may choose to take delivery of these shares into your own demat account.
Why Can This Be Useful?
- Continue your investment journey: If you like the stocks, you can continue holding them even after exiting the PMS.
- Greater flexibility: You decide when and how to sell the shares later.
- Potential tax planning: Since the shares are transferred instead of being immediately sold by the PMS, investors may have greater flexibility in planning future capital gains, depending on their individual tax situation. Professional tax advice should always be sought.
The Takeaway
Stock redemption is a valuable feature that combines the benefits of professional portfolio management with the flexibility of direct share ownership. It gives investors more control over how they exit their investment—an option that is generally not available in products like mutual funds, where redem**ption is always in cash.
For more information write to us at info@pmsinsights.in and we will guide you about the process with specific to your query.