Portfolio Management: Understanding its Significance, Characteristics, and Pros and Cons

In today's dynamic business environment, organizations and individuals alike face the challenge of managing a diverse range of assets, projects, and investments. This is where portfolio management comes into play. In this blog post, we will delve into the world of portfolio management with continuation to Lesson 1: Introduction to Portfolio Management in India, exploring its meaning, importance, characteristics, as well as the advantages and disadvantages it presents.

Portfolio Management: Understanding its Significance, Characteristics, and Pros and Cons Subramoneyplanning

What is Portfolio Management and it’s purpose? 

Portfolio management refers to the strategic process of managing a collection of investments, assets, projects, or resources to achieve specific goals and objectives. It involves analyzing, prioritizing, allocating resources, and making informed decisions to optimize the overall performance and value of the portfolio. Its primary purpose is to optimize the overall performance and value of the portfolio by analyzing, prioritizing, and making informed decisions.

Why is Portfolio Management Needed? 

Effective portfolio management is crucial for individuals and organizations to mitigate risk, maximize returns, and align investments with their goals and objectives. By adopting portfolio management practices, stakeholders can:

1. Diversify Risk: Portfolio management helps spread risk by investing in a mix of assets and projects. This diversification minimizes the impact of potential losses from individual investments.

2. Optimize Resource Allocation: Portfolio management ensures that resources, such as time, money, and human capital, are allocated effectively across different projects or investments. This maximizes efficiency and minimizes waste.

3. Align with Goals: Portfolio management allows individuals and organizations to align their investments with their strategic goals and objectives, whether they are financial growth, long-term sustainability, or social impact.

Importance of Portfolio Management:

The importance of portfolio management can be summarized through the following key points:

1. Risk Management: Portfolio management helps identify, assess, and manage risks associated with investments, enabling stakeholders to make informed decisions and reduce potential losses.

2. Performance Optimization: By evaluating the performance of individual investments and their contribution to the overall portfolio, portfolio management enables stakeholders to optimize their returns.

3. Strategic Decision-Making: Portfolio management provides a framework for evaluating and prioritizing investment opportunities, facilitating strategic decision-making and resource allocation.

Effective portfolio management is crucial for individuals and organizations alike. It helps mitigate risk, maximize returns, and align investments with goals and objectives. By adopting portfolio management practices, stakeholders can diversify risk, optimize resource allocation, and ensure their investments are aligned with their strategic vision.

Characteristics of Portfolio Management: 

Key characteristics of portfolio management include:

1. Goal-Oriented: Portfolio management is driven by specific objectives and targets. Whether it's maximizing returns, minimizing risk, or achieving a particular market share, the goals shape the investment strategy and decision-making process.

2. Diversification: Effective portfolio management involves spreading investments across different asset classes, sectors, and geographies. This diversification helps reduce risk by ensuring that the portfolio is not overly dependent on a single investment or market.

3. Monitoring and Review: Continuous monitoring and periodic review of the portfolio's performance, market conditions, and individual investments are essential. This allows stakeholders to make informed adjustments, seize opportunities, and ensure the portfolio remains aligned with the desired goals.

Advantages of Portfolio Management: 

Portfolio management offers several advantages, including:

1. Risk Reduction: Diversifying investments across a portfolio helps minimize the impact of any individual investment's failure, thus reducing overall risk. If one investment performs poorly, the positive performance of other investments can offset the losses.

2. Enhanced Returns: Portfolio management optimizes the allocation of resources, capitalizing on opportunities and improving overall returns. By carefully selecting investments, balancing risk and reward, and adjusting the portfolio over time, stakeholders can maximize their profitability.

3. Strategic Alignment: Portfolio management enables stakeholders to align their investments with their broader strategic goals. Whether it's financial growth, long-term sustainability, or social impact, portfolio management ensures consistency and synergy in investment decisions.

4. Performance Optimization: By evaluating the performance of individual investments and their contribution to the overall portfolio, portfolio management enables stakeholders to optimize their returns.

Disadvantages of Portfolio Management: While portfolio management brings numerous benefits, it also has a few potential drawbacks, including:

1. Complexity: Managing a diverse portfolio can be complex and time-consuming. It requires expertise, analysis, and ongoing monitoring to effectively navigate market trends, evaluate investments, and make informed decisions. This complexity can be a challenge for individuals and organizations without the necessary knowledge and resources. 

2. Costs: Portfolio management may involve expenses related to research, analysis, and professional advice. These costs can impact the overall returns of the portfolio, particularly for smaller investors or organizations with limited budgets.

3. Overdiversification: While diversification is a key advantage of portfolio management, excessive diversification can dilute potential gains. Managing and tracking numerous investments can become challenging, making it difficult to effectively monitor and adjust the portfolio.

Portfolio management is a vital discipline that enables individuals and organizations to strategically manage their investments, assets, and projects. By effectively allocating resources, mitigating risks, and aligning investments with goals, portfolio management optimizes performance and enhances returns. While it offers advantages such as risk reduction, improved returns, and strategic alignment, it also comes with potential disadvantages, such as complexity and costs. However, with careful planning, evaluation, and expert guidance, the benefits of portfolio management can outweigh its drawbacks, leading to more successful and prosperous outcomes.

Please refer Portfolio Management and its Objectives post for more clarifications. 

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10 Money Lessons Learned from IPL by Individuals: A Comprehensive Guide

 "Master Your Finances with IPL-Inspired Money Lessons"

The Indian Premier League (IPL) has not only been a platform for thrilling cricket matches but has also provided valuable money lessons that individuals can apply to their personal finances. This blog post explores the financial strategies and lessons that individuals can learn from the IPL. From smart investments to budgeting, risk management, and financial discipline, we will delve into the key money lessons derived from the IPL, supported by real-life examples.

 "Score Big in Your Finances: IPL's Money Lessons Revealed"

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"IPL and Money Management: A Complete Guide to Maximizing Financial Success"

 "Cracking the Code: IPL Money Management Strategies Revealed"

The Indian Premier League (IPL) has become one of the most popular and financially lucrative cricket tournaments in the world. With its massive fan following and substantial commercial success, the IPL has transformed the landscape of cricket and presented various opportunities for players, teams, sponsors, and organizers to generate significant revenue. However, managing the finances associated with the IPL requires careful planning and astute decision-making. In this blog post, we will delve into the meaning of IPL and money management, explore its salient features, answer the six WH questions, discuss the applicable time period, provide relevant scenarios and examples, weigh the advantages and disadvantages, and highlight key takeaways.

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Lesson 1: Introduction to Portfolio Management in India

Welcome to the first lesson of our 20-part blog series on portfolio management for beginners in India. In this lesson, we will provide you with a detailed introduction to portfolio management, its importance in the Indian context, key concepts, and the benefits it offers. Understanding the fundamentals of portfolio management will lay a strong foundation for your investment journey in India. So, let's dive in and explore the world of portfolio management!

Lesson 1: Introduction to Portfolio Management in India Subramoneyplanning

What is Portfolio Management? 

Portfolio management is the art and science of managing a collection of investments, assets, or projects to achieve specific financial goals. In the Indian context, it involves making informed decisions regarding asset allocation, diversification, risk management, and ongoing monitoring and adjustment of the portfolio.

Scenarios and Examples: 

Let's consider an example: You are an individual investor in India with a portfolio consisting of stocks, mutual funds, and fixed deposits. Portfolio management would involve evaluating the performance of each investment, rebalancing the allocation based on market conditions, and making informed decisions to achieve your financial objectives, such as wealth creation, retirement planning, or funding education.

Advantages:

• Diversification: Portfolio management allows for diversification across different asset classes in the Indian market, such as equity, debt, and commodities. This diversification reduces the risk associated with any single investment and helps protect your portfolio from market volatility.

• Risk Management: By carefully assessing and managing risks, portfolio management aims to minimize potential losses and protect your investments against market downturns or unexpected events.

• Goal Alignment: Portfolio management ensures that your investments align with your financial goals, taking into account factors specific to India, such as inflation rates, tax considerations, and economic trends. It helps you stay on track and work towards achieving your desired outcomes.

Disadvantages:

• Complexity: Portfolio management requires understanding investment strategies, market analysis, and monitoring. The complexity can be challenging for beginners in India without the necessary knowledge and expertise. It may require continuous learning and staying updated with market trends and regulations.

• Market Volatility: The Indian market is known for its volatility, and portfolio values may fluctuate. Investments may not always perform as expected due to economic, political, or other factors specific to India. It is important to have a long-term perspective and be prepared for market ups and downs.

Key Takeaways:

• Portfolio management involves managing a collection of investments to achieve specific financial goals in the Indian context.

• Diversification, risk management, and goal alignment are key advantages of portfolio management in India.

• Complexity and market volatility are potential challenges in portfolio management for beginners in India, emphasizing the need for continuous learning and long-term perspective.

Conclusion: 

This introductory lesson has provided you with a comprehensive understanding of portfolio management in the Indian context, its purpose, advantages, and potential challenges. As you embark on your investment journey in India, remember that portfolio management is a continuous process that requires careful analysis, regular monitoring, and adjustment to align with your financial goals and risk tolerance. Take advantage of the opportunities provided by the Indian market while being mindful of the risks. In the next lesson, we will explore the crucial aspect of setting financial goals in the Indian context and how they shape your portfolio management strategy. Stay tuned for more valuable insights and practical tips on portfolio management for beginners in India.

Please refer Portfolio Management and its Objectives post for more clarifications and learnings. 

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10 Powerful Personal Finance Quotes by Robert Kiyosaki Part 3

I would love to share today with part 3 of inspirational quotes from Robert T. Kiyosaki, Author of best selling book "Rich Dad Poor Dad". If you would like to know more about him, please do visit Part 1 of Robert Kiyosaki Quotes , Part 2 of Robert Kiyosaki Quotes

Robert Kiyosaki Quotes

Robert Kiyosaki, a renowned financial educator and author, has provided invaluable insights into the world of personal finance. His quotes inspire and motivate individuals to take control of their financial future. Gain insights into wealth mindset, asset-building, risk management, and more.

Let's explore 10 of his most powerful personal finance quotes:

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Importance of distinguishing between needs and wants

Needs vs Wants: The Importance of Distinguishing Between the Two

Imagine you're at the mall with your friends, walking past stores filled with beautiful clothes, shiny gadgets, and delicious treats. You start feeling the urge to splurge on the latest fashion item, even though you know you can't afford it. In situations like this, it's important to distinguish between your needs and wants. Needs are the basic necessities of life, while wants are desires or preferences that aren't essential for survival. Understanding the difference between the two is crucial for making responsible decisions, achieving financial stability, and living a fulfilling life.

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Portfolio Management and it’s objectives, nature & principles

Portfolio Management is a process encompassing many activities of managing investment effectively in assets and securities.

The term portfolio refers to collection of investment tools such as securities. Since it is rarely desirable to invest the entire funds of an individual or an institution in a single security, it is necessary that every security be viewed in portfolio context. A portfolio is not merely a collection of unrelated assets, but a carefully blended financial asset which include shares, bonds and debentures of the companies.

Portfolio management refers to the act of investing and managing a person's assets by a portfolio expert to increase your wealth in an effort to maximize return on capital.

Portfolio Management and it’s objectives, nature & principles

Objectives of portfolio management:

The objective of portfolio management can be classified into two categories as listed below:

1. Basic Objectives:

The basic objectives of portfolio management are

a) to maximize yield (Return of Investment)

b) to minimize risk

2. Ancillary Objectives:

The following are the other ancillary objectives of portfolio management:

a) Regular Return (Consistency)

b) Stable Income

c) Appreciation of capital by creating wealth

d) Take care of Investor’s Liquidity Requirement

e) Easy Marketability

f) Safety of Investment (Protection)

g) Tax Benefits (Reduce tax burden)

h) Allocation of optimal resources (Diversification)

i) Save for Retirement Plan

Nature of Portfolio Management

Portfolio Management is a dynamic and flexible concept and involves regular and systematic analysis, judgements and actions.
The aim of this service is to help the unknown and uninitiated investors with the expertise of professionals in portfolio management, as given below:
1) It involves construction of portfolio based upon the investors objectives, constraints and preferences for risk and return and tax liability.
2) The portfolio is reviewed and revised from time to time in tune with market conditions
3) The evaluation of portfolio is to be done in terms of targets set for risk and return.
4) The changes in the portfolio are to be effected to meet the changing conditions.

Principles or Elements of Portfolio Management

Portfolio Management is an on-going process involving the following basic tasks.

1) Identification of the investor's objectives, constraints and preferences to frame the investment policy (Buy and Hold Policy, Buy and Sell Policy, Constant Mix Policy, Variable Mix Policy Etc.,)

2) Development of strategies to minimize risk while selecting securities

3) Monitoring the performance of the portfolio by reviewing the market environments

4) Making comparison of portfolio income with targets of investment policy.

5) Making revision in the portfolio to adjust its achievements in relation to its targets.

Hope these details gave you an idea of what is portfolio management, it's objectives, nature and principles to manage effective investment & maximize your wealth.

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The 50/30/20 Rule of Thumb for Budgeting Explained with Examples

50/30/20 Rule of Thumb for Realistic Budgeting Explained with Examples 

Recently the question of "whose text makes you happy" was going viral on social media. Many people responded sarcastically that it was the news of 'Salary Credited' or 'Paycheck Received'.

Such salary will disappear in the next few days due to today's price hike. By budgeting your salary into 50:30:20 ratio, we can keep our expenses under control and save for the future. This time is for those who have no debt. Those who have debt should first find ways to pay it off quickly.

50/30/20 Rule of Thumb for Realistic Budgeting

This 50:30:20 budgeting system is very popular among money conscious people. By this method, one can manage his income successfully and easily.

So, what is the 50:30:20 budget rule ratio, it's simple. We should divide our income into 3 categories. This ratio is how much money should be allocated to which of the three categories.

50% of salary should be allocated for basic needs and maximum of 30% of salary can be allocated for desired buying options. 20% of salary can be earmarked for savings or future projects.

     

50% for Essentials (Requirements)

Unavoidable expenses come in essentials. We should allocate 50 percent of our income for these needs. If you are getting a salary of 50 thousand rupees,

you should have house rent, grocery, food, electricity bill, mobile bill, petrol, transportation, bike maintenance, health insurance, debt/ loan payments within ₹ 25,000 per month. Calculate the current cost of your basic needs.

If they are more than 50 percent of your salary, you are spending lavishly. Cut costs wherever you can as that will be good for your future.

30% for Wants (Desires)

Desires help make life more enjoyable and engaging. We can see spend some money on it. You can spend up to 30% of your salary on them.

You can spend up to 30% of your salary on travel, cinema, buying your favorite clothes, sporting goods, smartphones, smart TVs, etc.

These are all plannable expenses so you can get savings every month. If the salary is ₹ 30 thousand, you can allocate up to ₹ 15,000 per month for these.

20% for Savings (Investments for future)

As soon as the salary reaches the bank account, the first thing to do is to save 20% of the salary of ₹ 50,000 and save ₹ 10,000.

Then consider the above 2 costs. Many people may wonder if they can continue to save by starting a private, non-permanent job savings.

If you count like that, not a single rupee will last till the end. RDs, mutual funds etc. have the facility to start and stop saving anytime. So set a goal and keep saving consistently.

Always keep 6-9 months’ worth of monthly expenses in advance as an emergency fund in a bank deposit or Liquid Funds. If your household expenses are ₹ 20,000 rupees per month,

it is better to have ₹ 120,000 in hand (FD, Liquid Funds). Even if not now, keep creating it in the future. Even humans sometimes do not give trust like money that can give hope to your life.

As a final verdict, it is better to increase your savings 30%-40% for future by reducing essentials or wants spending to achieve financial freedom sooner than you think to retire. Hence revised 40/20/30 or 40/15/35 or 35/15/40 or 40/20/40 rule of thumb of budgeting would bring you more fortune and become rich faster. SO BE IT.

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Trading Days Calendar for 2021 (BSE & NSE India)

The below summarized list of Trading Days Calendar and Trading Holidays at #BSE India and #NSE India for the year 2021 which will be useful to make decisions to trading strategies on whether Stock Market is open or not for the day in Indian Share Market.

As you are well aware of Opening time, Trading Session Timing at BSE is 9:15 AM – 3:30 PM with Pre-opening Period of 9:00 AM -9:15 AM (15 minutes)

Below is the summary of Trading days and Holidays Calendar for 2021 (Month-wise)

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Top Best Free Bitcoin Faucets - Cryptocurrencies Faucets

Top Reliable Free Cryptocurrency Bitcoin Faucets

There are many Faucets around the world which pay free cryptocurrencies (Bitcoins (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Tron (TRX), Doge Coin etc.,.).

The following Faucets seems to be more reliable Free Cryptocurrency Faucets especially Free Bitcoin Faucets that are currently live in action to share free Satoshi or the pool of coins or rewards points or loyalty bonus or passive interest income to all visitors for doing some tasks, watching ads, PTC ads, playing games, completing surveys, filling captchas etc.,

Top Best Free Bitcoin Faucets - Cryptocurrencies Faucets 2020

Reliable Bitcoin Faucets Summary

1) https://freebitco.in/

 New Bitcoins every 60 min
 Max Earnings: $ 200 per Hour
 Registration: Mandatory
 Bonus: Yes Received

Freebitco.in Faucet Description
FreeBitco.in is one of the oldest and biggest bitcoin faucets on the internet. They give away up to $200 every hour in the form of free bitcoin satoshi’s by rolling the numbers with just entering captchas. There is also chance to win lotteries, betting high/low, golden tickets and reward points, Bitcoin Savings account with 4.08% interest rate compounded daily.

2) https://hashrapid.io/

New Bitcoins every seconds
Max Earnings: 2,000 Satoshi (Free Account) and 11,00,000 Satoshi (Diamond)
Registration: Not Mandatory

Hashrapid.io is a smart bitcoin cloud mining service developed for affordable bitcoin mining, meanwhile designed to provide frequent mining payouts within the shortest possible timeframe. If you are looking for passive income or want to multiply your bitcoins, don't waste your time and start bitcoin mining today with Hashrapid!

3) http://cointiply.com/

 Free 100 coins on joining
 New Bitcoin: Every 12 hours
 Registration: Mandatory
 Bonus: Yes Received

Cointiply Faucet Description

Cointiply Bitcoin (BTC) Faucet's Free Account allows 2 times of Faucet Roll in a day to win coins. And it has a portal of useful links to earn Bitcoin by completing surveys & offers, tasks, playing games, watching videos or watching advertisements.

4) http://bonusbitcoin.co

 New Bitcoins every 15 min
 Max Earnings: 5,000 Satoshi
 Registration: Mandatory
 Bonus: Yes Received

Bonusbitcoin.co Faucet Description

Bonusbitcoin.co is a one of the best and largest faucets where you can decide when to claim satoshi with maximum chance of winning 5,000 Satoshi every 15 minutes. There is loyalty bonus of 5% if you are loyal and frequent visitor every day without discontinuing. Also, there is additional chance of winning with Dice game, completing surveys and offers.

5) http://moonbit.co.in

 New Bitcoins every 5 min
 Max Earnings: Depends on long claiming time
 Registration: Not Mandatory but Login must
 Bonus: Yes Received

Moonbitco.in Faucet Description

Moonbit.co.in allows claiming of free bitcoins (BTC Satoshis) every 5 minutes with increase in payout up to 100% for loyal visitors. Also, you can complete offers, surveys, tasks. Having longer duration in between each claim of bitcoins will fetch more satoshis.

6) http://Bitfun.co

 New Bitcoins every 3 min
 Registration: Mandatory
 Bonus: Yes Received

Bitfun.co Faucet Description

Bitfun.co is a faucet where you can claim every 3 minutes with filling captchas. Also, you can earn Bitcoins (BTC Satoshis) by playing games, viewing advertisements.

7) http://Coinpot.co

 New Bitcoins every 3-5 min (Multiple Options)
 Max Earnings: Depends on long claiming time
 Registration: Mandatory to accumulate
 Bonus: Yes Received

Coinpot.co Faucet Description

Coinpot.co is a cryptocurrency micro-wallet where many reliable Free Faucets are linked (some are provided above) which will deposit all collected coins in one place for easy deposit and withdrawal of Bitcoins (BTC)

These are not the final exhaustive list of free bitcoin faucets but will be added or modified as suitable for the criteria of reliable nature.

To know more about what is Cryptocurrencies and Bitcoin, please check out at:

https://subramoneyplanning.blogspot.com/2017/08/what-are-cryptocurrencies.html

https://subramoneyplanning.blogspot.com/2017/09/what-is-bitcoin.html

 

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10 Key Features of Sovereign Gold Bond Scheme (SGB) by RBI Overview

 Sovereign Gold Bonds Scheme (SGB) Introduced:

Sovereign Gold Bonds Scheme are popularly known as SGB scheme in India. Sovereign Gold Bonds Scheme were introduced in November 2015 by the Government of India under the Gold Monetization Scheme. 

Prime Minister Narendra Modi launched four Gold related schemes viz., Gold Monetization Scheme (GMS), Sovereign Gold Bond Scheme (SGBs), Gold Coin Scheme and the Gold Bullion Scheme on Thursday 5th November 2020 to reduce demand / hold of physical Gold and aim at productive use of 20,000 tons of precious gold lying idle in Indian households and temples. Reserve Bank of India in consultation with the Government of India will issue the bond as substitutes for holding physical gold.

10 Key Features of Sovereign Gold Bond Scheme (SGB) by RBI Subramoneyplanning.blogspot.com

10 Key Features of Sovereign Gold Bond Scheme (SGB)

1)      Eligibility Criteria for Investment:

Sovereign Gold Bonds are restricted only to be sold to Resident of India which includes individuals, HUFs, Trusts, Universities and Charitable Institutions. Also, Resident Individuals can invest on behalf of minors.

2)      Tenure:

The tenure of the bond is fixed at 8 years with premature exit options exercised at the end of the 5th, 6th and 7th year.

3)      Minimum Investment Limit:

Minimum Value of 1 gram of gold for all type of Investors and in multiples of grams

4)      Maximum Investment Limit:

Maximum Value of 4 Kilograms for Individual and HUFs, 20 Kgs for Trust and all other similar entities per fiscal year (April-March)

5)      Interest Rate:

Sovereign Gold Bond bear interest at 2.5% (fixed rate) per annum. Interest will be credited semi-annually to investor's bank account and the last interest shall be payable with principal amount on maturity.

6)      Availability:

Bond is available both in Demat and Paper form

7)      Issue Price:

Issue price of a Sovereign Gold Bond is fixed in INR on the basis of simple average of closing price of 999 purity gold (24 carat) published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 business days of the week preceding the subscription period.

8)      Redemption Price:

On maturity of the Sovereign Gold Bond, bond shall be redeemed in Indian Rupees on the basis of simple average of closing price of 999 purity gold (24 carat) published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 business days of the week preceding repayment date.

9)      Where it is sold:

The Gold Bonds can be purchased through banks, Stock Holding Corporation of India Limited (SHCIL), selected post offices and trading through NSE and BSE (National Stock Exchange of India and Bombay Stock Exchange of India)

10)  Finally, who can buy or invest in Sovereign Gold Bond Scheme (SGBs)? Or SGB is suitable for whom?

The investors who are conservative in nature, low risk appetite persons, those who are fond of gold as a safe investment and those who want to protect against risk of theft or cost of storage in physical form can buy or invest in  Sovereign Gold Bond Scheme (SGBs) as it has all the benefits of gold investment with more secure mode of investment backed by the Government of India with interest rate & no loss on making charges and probability of appreciation of gold price during redemption.

For more latest details about SGBs (Sovereign Gold Bond Scheme) press release from RBI Circulars, please have a look at https://rbi.org.in/Scripts/BS_SwarnaBharat.aspx

For most frequently asked questions (FAQs) regarding Sovereign Gold Bond Scheme (SGBs), please have a look at https://m.rbi.org.in/Scripts/FAQView.aspx?Id=109

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Advantages and Disadvantages of Management Accounting

Management Accounting provides the accounting information which is useful for planning, directing and controlling the activities (covering major principles of management) of an organization. J. Batty defines Management Accounting as “the term used to describe the accounting methods, systems and techniques which coupled with special knowledge and ability, assist management in its task of maximizing profits or minimizing losses”.

To know more about Definition, Objectives & Tools of Management Accounting, you can have a visit @  https://subramoneyplanning.blogspot.com/2019/10/management-accounting-definition-objectives-tools-used.html

To know more about Scope & Functions of Management Accounting, you can have a visit @ https://subramoneyplanning.blogspot.com/2019/11/scope-and-functions-of-management-accounting.html

We know that everything has it’s own merits (uses) and demerits (limitations) , so let’s take a overview of the Advantages and Disadvantages of Management Accounting

Advantages of Management Accounting

The advantages of management accounting can be seen in the following:

1)      Systematic Operation: With the help of management accounting, the business activities are planned effectively. This will avoid over working in busy periods and slackness In slump periods.

2)      Profit Maximization: It enables the business to get maximum return on capital by helping it in planning, controlling and coordinating the activities.

3)      Better Relationship with workers: It helps to improve the relationship between the management and the workers and motivate them to achieve the goals of the enterprise. It ensures high degree of morale in the organization.

4)      Better Customer Services: By comparing the results with the standards continuously, it helps the management to improve its services to the customers.

5)      Communication of Information: The management accounting provides information not only to the management but also to outsiders. It helps the management in communicating progress, financial position etc., of the enterprise to the creditors, investors and shareholders etc.,

Disadvantages of Management Accounting

1)      Dependence on basic records: The management accounting depends mainly on cost and financial accounts for deriving the information. Therefore, the strength and weakness of management accounting depends upon the weakness of these accounts.

2)      Continuous effort: The conclusions drawn from management accounting will not readily be accepted. Therefore, the management accountant must take continuous efforts to convince the people at all levels to accept his ideas.

3)      Tool of Management: The management accounting is a tool of management. Therefore, it cannot replace the management and administration. The management accountant can give his advice but the decision regarding the implementation of his advice will be taken only by the management.

4)      Costly system: The installation of management accounting system is costly since it requires elaborate organization. Therefore, it can be adopted only by big business concerns.

5)      Wide area of operation: The scope of management accounting is very wide since it takes into account both monetary and non-monetary factors. Therefore, the conclusions derived by it will not be more accurate.

6)      Change in accounting practices: The management accounting requires change in traditional accounting practices. Such a change can be made only by rearrangement of personnel and their activities which is generally opposed by the people concerned.

Thus, these are the advantages (Merits) and disadvantages (Limitations / Demerits) of Management Accounting for implementing to maximize profit and control cost and loss.

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Trading Days Calendar for 2020 (BSE & NSE India)

Here is the list of Trading Days Calendar and Trading Holidays at BSE India and NSE India for the year 2020 which indicates whether Stock Market is open or not for the day in Indian Share Market.

As you all know, Trading Session Timing at BSE is 9:15 AM – 3:30 PM with Pre-opening Period of 9:00 AM -9:15 AM (15 minutes)

Below is the summary of Trading days and Holidays Calendar for 2020 (Month-wise)

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20 Warren Buffett Quotes on Stock Picking, Risk & Leverage

Warren Edward Buffett (popularly known as Warren Buffett) is an American based Investor, Business Magnet, Chairman and CEO of Berkshire Hathaway. 

Warren Buffet is considered one of the most successful investors in the world, also one of the top 10 wealthiest person in the world for the last few decades and currently he is ranking third among top wealthiest person in the world with $82.5 Billion Net worth. His Investment wisdom and his Investment Quotes related to Investing are most popular among all Investors for almost half century and so on.

Here we will list down famous Warrant Buffet Quotes on Stock Picking, Risk and Leverage:

1)      “Rule No. 1: never lose money; rule No. 2: don’t forget rule No. 1” ~ Quote by Warren Buffet

2)      “Risk comes from not knowing what you’re doing.” ~ Warren Buffet

3)      “Never invest in a business you cannot understand.” ~ Warren Buffet

4)      “When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.” ~ Warren Buffet

5)      "If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds." ~ Warren Buffet

6)      “Keep all your eggs in one basket, but watch that basket closely.” ~ Warren Buffet

7)      Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their "chart" patterns, the "target" prices of analysts, or the opinions of media pundits. ~ Warren Buffet

8)      “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing” ~ Warren Buffet

9)      Buy into a company because you want to own it, not because you want the stock to go up. ~ Warren Buffet

10)   We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as “the possibility of loss or injury.” ~ Warren Buffet

11)   "If you don't feel comfortable making a rough estimate of the asset's future earnings, just forget it and move on." ~ Warren Buffet

12)   "Buy companies with strong histories of profitability and with a dominant business franchise." ~ Warren Buffet

13)   “It’s only when the tide goes out that you learn who has been swimming naked.” ~ Warren Buffet

14)   "We want products where people feel like kissing you instead of slapping you." ~ Warren Buffet

15)   "It's better to have a partial interest in the Hope diamond than to own all of a rhinestone." ~ Warren Buffet

16)   "In the business world, the rear view mirror is always clearer than the windshield." ~ Warren Buffet

17)   “The best chance to deploy capital is when things are going down." ~ Warren Buffet

18)   "It's been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance." ~ Warren Buffet

19)   “When you combine ignorance and leverage, you get some pretty interesting results.” ~ Warren Buffet

20)   “I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” ~ Warren Buffet

Feel free to share more famous quotes of 20 #Warren Buffet on Stock Picking, Risk and Leverage.  

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Scope and Functions of Management Accounting

J. Batty defines Management Accounting as “the term used to describe the accounting methods, systems and techniques which coupled with special knowledge and ability, assist management in its task of maximizing profits or minimizing losses”.

Scope of Management Accounting

The Management Accounting includes the following fields / scope of activities:

       1)      Financial Accounting: Financial accounting is the basis for Management accounting. Therefore, there must be a properly designed financial accounting system. Otherwise, the management cannot obtain full control and co-ordination of activities.

       2)      Cost Accounting: The costing techniques like standard costing, budgetary control, marginal costing, opportunity costing etc., play a vital role in the creation of policies and the operation of the undertaking.

       3)      Statistical Methods: The statistical tools like graphs, charts etc., help the management to understand the facts clearly. The statistical methods are also useful for drawing up plans and conclusions without waste of time and energy.

       4)      Internal Control: Internal control systems like internal check, internal audit and inventory control etc., ensure accurate information which is useful for making correct decision.

       5)      Office Operations: The office services which include maintenance of proper data processing and other office management services are also useful to the management in carrying out its functions.

       6)      Legal Provisions: The management decisions depend on various rules and regulations.

Functions of Management Accounting

The basic function of Management Accounting is to help the management in carrying out its function effectively. This basic function involves the following other activities:

       1)      Providing the Data: The management accountancy provides the necessary data for the drawing up of it plans.

       2)      Modification of Data: Th management accountancy compiles and classifies the data properly for decision making.

       3)      Analysis and Interpretation of Data: In order to make the data more meaningful to the management, the accounting data is analyzed by means of comparative statements, ratios and percentages, cash flow and fund flow statements.

       4)      Means of Communication: The Management accountancy serves as a means of communication by expressing the effectiveness of organizational capabilities and methods of carrying out plans.

       5)      Facilitating Control: The Management Accounting enables the management to control the organization by fixing the goals and the time limits for their attainment. In any system of control, the standard of performance and the analysis of variations therefrom are essential. This is made possible in management accountancy through budgetary control and standard costing.

       6)      Qualitative Information: The financial data alone is not sufficient for the management for decision making. It may require some other information which is not capable of being expressed in terms of money. Such information like statistical compilation, minutes of meetings, engineering records etc., are also collected in management accounting.

Thus, these are the scope and functions of Management Accounting for assisting management to maximize profit and control cost and loss.

To know more about Definition, Objectives & Tools of Management Accounting, you can have a visit @ https://subramoneyplanning.blogspot.com/2019/10/management-accounting-definition-objectives-tools-used.html

To know more about Advantages and Disadvantages of Management Accounting, please do visit @ https://subramoneyplanning.blogspot.com/2020/08/advantages-and-disadvantages-of-management-accounting.html

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