The short version
Mutual funds are the mass-market pooled product with the tightest rules. SIFs are pooled too, but with far more strategy freedom and a ₹10 lakh entry. PMS gives you a demat account in your own name from ₹50 lakh. AIFs are the ₹1 crore private-fund route with the widest mandate and the least liquidity.
Minimum investment
- Mutual fund — from ₹100–₹500. No suitability gate.
- SIF — ₹10 lakh per fund house across its SIF strategies.
- PMS — ₹50 lakh, regulated minimum.
- AIF — ₹1 crore for most Category I/II/III schemes.
Who holds the securities
In a mutual fund and in a SIF you own units of a pooled scheme and the fund holds the securities. In a PMS the shares sit in your own demat account, so your portfolio is genuinely yours and can differ from the next client's. An AIF is pooled again, usually with a fixed tenure.
Strategy freedom and shorting
A mutual fund can hedge only in limited ways and cannot run a meaningful short book. A SIF can short through derivatives within SEBI's stated limits — that is the entire point of the category. Category III AIFs can also go long-short, and typically with even fewer constraints, but at ten times the ticket size. Most PMS strategies remain long-only.
Liquidity and transparency
SIFs publish NAVs and can be open-ended, interval-based or close-ended depending on the strategy, so read the scheme's redemption terms before investing. Mutual funds are the most liquid. PMS is liquid in principle but exiting means selling underlying shares. AIFs usually lock money in for years.
Disclosure follows the same order: mutual funds publish full portfolios monthly, SIFs disclose under SEBI's SIF framework, PMS reports to you directly, and AIFs disclose privately to unitholders.
Cost and taxation
Mutual funds and SIFs are charged within a SEBI expense-ratio framework. PMS and AIF often add a performance fee over a hurdle rate. Taxation differs meaningfully — SIF units are taxed at the scheme level as equity- or debt-oriented depending on the portfolio, while PMS is taxed transaction-by-transaction in your own hands.
How to choose
Ask three questions: how much are you committing, do you want to see your own holdings, and do you actually want downside hedging? Below ₹10 lakh, the answer is mutual funds. At ₹10 lakh with an appetite for a hedged strategy, a SIF fits. At ₹50 lakh with a preference for direct ownership, PMS. At ₹1 crore with a long horizon, an AIF.
For information only, not investment or tax advice. Rules and tax rates change with each Finance Act and with SEBI circulars — confirm the current position with AGM Wealth (ARN 124172) and your chartered accountant before acting.