GLOSSARY OF FINANCIAL TERMINOLOGY          PA3.00           PAGE 1 OF 11

This chapter explains a number of financial terms as they are used in
the Personal Portfolio Analyzer.  It is not intended to be a complete
text on financial management or portfolio analysis.

Many books on portfolio management are available; entire college courses
are taught on the subject.  Check out a local library, or visit a book
store that has a good business section.  The author is not recommending
any particluar book, as new ones come out all the time and old ones go
out of print.

Annual Appreciation (or Depreciation): The actual percentage increase
        (or decrease) in market value over a period of time, adjusted
        to a compounded annual basis.

        Another way to put that is: the compounded annual rate at which
        a beginning value will grow to an ending value over a particular
        period of time.




GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 2 OF 11

        Annual Appreciation does not take into effect any dividends or
        interest that might be paid.  If a security decreases in value
        the annual appreciation will be negative (in other words,
        depreciation).

BETA:   A measure of the volatility of the price of a security; how the
        price of that security has behaved in the past in relation to
        the market itself.  For example if a stock has a Beta of 1.25
        and the market goes up 10%, the price of that stock might tend
        to go up 12.5%.  Beta is calculated based on how the market and
        how individual stocks or funds have behaved in the past.  It is
        an important measure of risk (see definition).

        Beta for stocks can be obtained from the Value Line Investment
        Survey.  Beta for funds can be obtained from various fund
        guides.  Beta for any security can be entered in the Securities
        Register.  The Personal Portfolio Analyzer does not compute
        individual Betas.  Betas for groups of tax lots in reports are
        weighted by market value (see Appendix C for formula).


GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 3 OF 11

Category: In the Personal Portfolio Analyzer, an additional way to allo-
        cate portfolio value among various stocks and mutual funds.
        Stocks can be categorized by industries such as COMPUTERS or
        UTILITIES.  Funds can be categorized by objectives such as
        INCOME or GROWTH.  Only common stocks and mutual funds can be
        categorized in this manner.  Categories are entered in the
        Securities Register.

Closed Position: A number of shares (or other units) of a security pur-
        chased on a particular date, which you have sold (closed out).
        Also, a short sale that has been covered by re-purchasing the
        borrowed shares.

Cost Basis: The taxing authority's view of what you paid for a security.
        Usually this is the actual purchase cost, including any commis-
        sions and other fees.  If you inherit a security, the cost basis
        may be the fair market value on the date of inheritance.
        See your tax advisor about this.



GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 4 OF 11

Multiple: See Price/Earnings Ratio, which is sometimes called a
        "multiple".

Open Position: A number of shares (or other units) of a security pur-
        chased on a particular date, which you still own.  It can also
        be a short sale (borrowed shares that you have sold) and not
        covered.














GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 5 OF 11

Portfolio: In the Personal Portfolio Analyzer, any grouping of security
        purchases stored on disk as a named file.  A portfolio can con-
        tain different types of securities such as bonds and stocks.
        It can contain multiple purchases of the same security on dif-
        ferent dates.  It can represent all holdings of an individual
        person, or all holdings kept by a particular broker, or all
        holdings pertaining to a particular trust agreement.

        Note that a PORTFOLIO is a group of purchase transactions; the
        CATALOG (see definition) is a group of securities known to the
        system.  Both of these groups are disk files with names ending
        in .POR.  A security must exist in the catalog before it can be
        purchased in any portfolio.  However, it is added to the catalog
        only once, while it can be purchased any number of times in any
        number of different portfolios.

        A portfolio has a maximum capacity of 255 entries (tax lots and/
        or account balance entries), and requires 16,384 bytes of disk
        space regardless of how many entries it contains.


GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 6 OF 11

Price/Earnings Ratio or P/E Ratio: A stock's current price divided by
        the company's annual earnings.  For example the stock of a com-
        pany that has earnings of $5.00 per year sells for $50.00.  Its
        P/E ratio is 10.

        Usually, stocks that have high growth - such as technology
        stocks - tend to have high P/E ratios, and stocks that have
        lower growth - such as utility stocks - tend to have low P/E
        ratios.  This is because one is usually willing to pay more per
        dollar of earnings for a high-growth company.  P/E ratios as a
        whole tend to vary with the market, the economy, and the corpor-
        ate outlook.

Purchase Lot: see Tax Lot.







GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 7 OF 11

Report Date: The ending (or only) report date is the "as of" date in a
        report; it is the date for which that information is current.
        The ending report date does not necessarily have to be the cur-
        rent date.  The program uses report dates to select the correct
        transactions to appear on a report, for example any purchases
        made after the ending report date will not appear on that re-
        port.  The INCOME and MARKET report functions in the Master Menu
        use only an ending report date.

        The beginning report date (if specified) works with the ending
        report date to define the scope of reports which show what has
        occurred over a period of time, such as the month of May 1993.
        The GAINS/LOSSES and TAX report functions in the Master Menu use
        both the beginning and ending report dates to select the infor-
        mation that will appear in those reports.

        See Chapter 13 for more information on entering price quotes and
        setting report dates.  See Chapters 19 and 20 for more informa-
        tion on reports.


GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 8 OF 11

Risk: The probability that an investment will increase or decrease in
        value over time.  There are a number of elements to risk.
        Market risk is due to factors in the market, such as institu-
        tional buying and selling.  Industry risk is due to factors in
        the industry such as the decline in popularity of a product.
        Regulatory risk is due to the possibility of regulation by gov-
        ernmental bodies.

        One way to measure risk is through measurement of Beta (see def-
        inition).  Beta is a measure of the volatility of security
        prices, and therefore is a historical measure.  If one assumes
        that past history is likely to be repeated, then Beta can be
        used as a measure of risk.

        Degrees of risk are not necessarily associated with particular
        types of securities; all types of securities have some degree
        of risk.  For instance, even though municipal bonds are consi-
        dered by many to be "safe", there are municipal bonds which car-
        ry a very high level of risk.


GLOSSARY OF FINANCIAL TERMINOLOGY                           PAGE 9 OF 11

Security Type: The general classification of securities.  The types of
        securities recognized by the Personal Portfolio Analyzer are as
        follows, in the order in which they normally appear:

        Cash accounts, margin accounts, commerical paper, Treasury
        securities, municipal bonds, corporate bonds, preferred stocks,
        common stocks, mutual funds, warrants, put and call options,
        precious metals, composite indices.

Short Sale: A number of shares of a security which you borrowed, and
        then sold on a particular date.  The idea is to make a profit by
        re-purchasing those shares (covering the short sale) at a lower
        cost later on.  One would only consider making a short sale if
        one thinks the price of a security is most likely to go DOWN.
        This can be a very volatile process because your gains are limi-
        ted to the sale price, while your losses are UN-limited!

        This version of the Personal Portfolio Analyzer is not designed
        to handle short sales.


GLOSSARY OF FINANCIAL TERMINOLOGY                          PAGE 10 OF 11

Tax Lot: A number of shares (or other units) of a security purchased on
        a particular date.  Its significance is the holding period (how
        many months and days it has been owned).  This is important for
        tax purposes, and for calculating annual return.

Technical Analysis: The process of analyzing securities based only on
        the movements of their sales volumes and market prices.  Tech-
        nicians (those who perform technical analysis) use programs like
        the Stock Charting System (and more complex tools), and pore
        over various kinds of graphs and charts.

        This is opposed to fundamental analysis, which is based on the
        corporate balance sheet and income statement and the nation's
        economy.

Total Return: The algebraic sum of Annual Appreciation and dividend or
        interest yield.  See Annual Appreciation and Yield for more in-
        formation.



GLOSSARY OF FINANCIAL TERMINOLOGY                          PAGE 11 OF 11

Transaction: An individual purchase of a number of shares or other units
        of a security in a portfolio. In the Personal Portfolio Analyzer
        a transaction is a single 64-byte record and is equivalent to a
        tax lot.  However the sale of that tax lot does NOT add another
        transaction record; an individual transaction record has space
        to record both the purchase and sale of that tax lot.

Yield: A security's annual dividend or interest expressed as a percent-
        age of the security's price.  For example a stock that sells for
        $50.00 per share and pays an annual dividend of $2.50 is yield-
        ing 5% ($2.50 / $50.00 x 100).  Utility and financial stocks
        tend to pay higher dividends; high-growth stocks tend to pay
        lower dividends (or none at all) because profits are re-invested
        in the business.

        Yield can also be calculated based on a security's original pur-
        chase price and is known as "yield on cost".
