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RupeeCase

Education . PMS Fee Math . 3 of 3

The Lesson

Two and twenty is not bad. It just sets a very specific alpha threshold.

Three honest questions to put against any fee structure before signing the agreement.

Does the manager actually beat the index by more than four points after fees?

Two and twenty pulls roughly four percent a year out of an 18 percent gross book. So the question is not whether the manager is good. The question is whether the manager is good enough to overcome the fee stack and still beat what you could have got from a low-cost index. Alpha after fees is the only number that matters.

Test . Look at the fund's three-year and five-year net returns. Compare to Nifty 50 TRI. The gap is the alpha you actually got.

Is the fee structure paying for skill or paying for custody?

A PMS gives you a custodian, a discretionary execution layer, and a relationship manager. That is a real service. The price tag for it is the fee stack. If you are running a Rs 50L portfolio and you do not want to place trades or rebalance yourself, the structure earns its keep. If you are willing to execute the trade list yourself, the same alpha can be had at a fraction of the drag.

Test . Ask yourself . am I paying for the picks, or for not having to push the buttons?

Have you ever seen the rupee number, not just the percentage?

Four percent sounds small. Rs 38 lakh on a Rs 25 lakh starting corpus over ten years does not. Most fee discussions happen in basis points because basis points feel painless. Compound them and the gap between what the strategy earned and what the investor kept becomes bigger than the original ticket itself. Always run the rupee math. Always run it long.

Test . Take the fee percent you pay. Multiply by your portfolio. Multiply by ten years. That is what the structure costs.

There is no honest way to compare two structures without laying their fee stacks on the same page. The compounder does not care about the brochure.

Lay the fee stack of your current setup against a subscription model. Same view. One page.

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