According to Kshitiz Mahajan, Managing Partner & CEO of Complete Circle Wealth, model portfolios are essentially curated investment structures where stocks are selected, distributed, and executed in a systematic manner. As reported by Zee Business, these investment vehicles are often theme-based, such as mid-cap, small-cap, defence, energy or manufacturing sectors. Unlike mutual funds where investors receive units based on net asset value (NAV), model portfolios involve direct ownership of stocks in the investor's demat account with execution happening directly in the investor's account and rebalancing updates shared with investors.
According to the experts, model portfolios offer more accessible entry points compared to Portfolio Management Services (PMS), which typically require a minimum investment of ₹50 lakh. As reported by Zee Business, model portfolios or smallcases can start from ₹1 lakh or even ₹5 lakh depending on the structure. Certified Financial Planner Poonam Rungta noted that model portfolios are not restricted to specific investor categories and can be accessed by anyone, but suitability depends on risk awareness and financial goals alignment.
Experts highlighted that model portfolios offer higher transparency compared to mutual funds, as underlying stock holdings are visible in the investor's demat account. However, as explained by Rungta, capital gains tax may apply during rebalancing because stocks are directly held by investors. She cautioned that frequent rebalancing could lead to repeated tax events, even though the cost structure may be lower compared to traditional fund management products.
Despite growing popularity, experts advised against model portfolios for beginners. According to Rungta, 'Personally, I would not recommend model portfolios for first-time investors.' She explained that investors need basic understanding of markets, volatility, and risk before using these products, comparing it to sitting in a plane as a co-pilot. She suggested that beginners should ideally start with mutual funds before moving to more complex equity strategies.
Mahajan stressed the importance of diversification and disciplined allocation across asset classes, recommending a balanced approach with mutual funds for core allocation, index funds or ETFs for low-cost exposure, and a small portion, say 5-10 per cent, in model portfolios. He suggested that investors should review portfolios periodically, with a review every six months important to ensure alignment with financial goals and sectoral trends. Rungta emphasized that rebalancing is essential to prevent asset allocation drift from target levels and that diversification helps reduce emotional investing and FOMO.
