The PC-SIG Library 10

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ADD/DELETE PORTFOLIO TRANSACTIONS RELEASE 2.11 PAGE 1 OF 10 This screen is used to buy and sell securities, or to make corrections to pur- chases or sales. You can also process distributions of capital such as stock splits and mutual fund distributions, and you can specify Federal and State tax rates (for the active portfolio only). First, a few definitions. When you purchase a security, you are said to have taken a "long" position in that security. If you borrow money for that pur- chase, that is known as buying on margin. If on the other hand you borrow the security itself, you are said to have taken a "short" position or to have made a "short" sale, and you will hope to re-purchase that security later at a lower price. This re-purchase is referred to as "covering" the short position. In either of the above cases, you have an "open" position. The act of selling a security you own, or covering a short position, is sometimes referred to as "closing" that position. This program cannot handle short sales. Short sales are more often used by professional traders than by individuals. They pose the possibility of limited gains, but of unlimited losses. Although this program will handle purchases on margin, a future version will compute margin and investable funds. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 2 OF 10 Notice that the screen was divided into four areas. From top to bottom these are the column headings, individual purchases, portfolio summary and menu. The column labelled DATE OF SALE OR CURR.PRICE contains the current price per share (or other unit), if available, for open positions and the date of sale for closed positions (an open position has no date of sale). The column labelled MARKET VALUE contains the current market value (or purchase cost if current price per unit is not available) for open positions, or sale proceeds if the position is closed. The portfolio summary has a line labelled POSITIONS CURRENTLY OPEN. This line shows the total cost basis, market value and dollar gain or loss in the port- folio as of the current (DOS system) date. The line labelled POSITIONS CLOSED THIS YR. shows the total cost basis, sale proceeds and gain or loss in securi- ties you sold during the current calendar year. (WARNING: The program gets the calendar year from the DOS system date). The lower right-hand corner of the screen shows the name of the portfolio and how full it is, for example 34/255 means the portfolio contains 34 transactions out of a maximum of 255. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 3 OF 10 On the left side of the screen, in the "symbol" column, one of the ticker symbols is in a solid video block which is referred to here as the selector block. The selector block is used to select an individual position to close out, delete or make a correction to. It can be moved up and down by using the up- and down-arrow keys on the right side of the keyboard; the display will "scroll" automatically as required. In addition the Home, End, PgUp and PgDn keys can be used to "browse" through the portfolio transactions; and the left- and right-arrow keys can be used to select a data item to be corrected. Aside from moving the selector block and "browsing" through the portfolio, the available menu choices are explained below. The portfolio summary is updated automatically each time you make any changes. A = Add/Delete Securities. This function will take you to the Add/Delete Securities screen. Any data you have entered will automatically be saved to disk at this time. A security cannot be bought in any portfolio until it has been added to the catalog, with the Add/Delete Securities screen. The Add/Delete screen has its own menu and Help screens for more informa- tion. NOTE: Current market prices are entered in the Add/Delete Securities screen. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 4 OF 10 B = Buy a security (long). This function is also used to process a cash divi- dend re-investment, since the program does not account for actual income received. A dividend re-investment is therefore just like any other pur- chase. The information (number of shares and purchase cost) should come from your account statement. All purchases are kept in ascending order by type of security (not shown on the screen), security identifier (usually the ticker symbol) and the date of purchase (or date of account balance for cash equivalent accounts). Security types are kept and displayed in the following order: cash & margin accounts, commercial paper, "money market", municipal and corporate bonds, preferred and common stocks, warrants and options, and precious metals. The program first asks you for a ticker symbol, which must already exist in the catalog. If it doesn't exist, use the A function (explained previous- ly) to go to the Add/Delete Securities screen and add that security to the catalog first. If there is no official ticker symbol, one must be made up. Once a security has been added to the catalog, it can be purchased any num- ber of times in any portfolio. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 5 OF 10 B = Buy a security (long). After you enter the ticker symbol you will be asked to enter the date of purchase. The new transaction will then be shown on the screen (you can still cancel by pressing Esc). Next, enter the number of shares or other units (if applicable). For bonds or T-bills, use the face value in hundreds, for example enter 250 if you bought $25,000 face value of municipal bonds. Then you enter the cost basis (normally, that is what you actually paid for the security). The cost basis should include commission and other expenses. This information should be available from your brokerage firm or mutual fund statement. If the security is a cash or margin account or commercial paper, you will be asked for the account balance instead of cost basis. You can have any number of account balance entries with different dates for the same account and the correct one will be automatically selected on reports according to the report date(s). If appropriate and it hasn't already been entered, the program will also ask for the current price (market value) per share or other unit. If no price is available, market value will be assumed to be equal to cost basis. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 6 OF 10 D = Distribution or split. This function is to apply a stock split, stock div- idend or mutual fund distribution. It is not intended for re-investment of cash dividends. Information about the distribution of income or capital (from mutual funds, or sometimes from utility stocks) can be found in the corresponding statements which the fund sends, usually each quarter. They should tell you whether it is income or capital and what effect it has on your holdings. As a rule, a cash dividend represents interest and dividends the fund receives and remits to you, just like interest on a savings ac- count. A capital distribution represents profits on the sale of securities. The author of this program is not a professional accountant, and you are strongly urged to seek the advice of your own accountant or tax advisor regarding these matters. He or she can assist you as to whether a distri- bution is capital or income and what the accounting and tax effects are. To apply a distribution or split, move the selector bar to any transaction in the applicable security and press D. The security must be a common stock or mutual fund. At least one open position must exist, but the sel- ector bar doesn't necessarily have to be on that open position. Press the Esc key any time to terminate the function. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 7 OF 10 D = Distribution or split (continued). A distribution or split can be applied using either of the two methods described below. The program will ask if you are applying a (S)tock split or a (D)istribution. If you answer S the first method is used; otherwise the second method is used. Although nor- mally the first method is for stocks and the second is for funds, the end result is the same - a ratio is computed and unit price and quantities are changed. Either method can be used for either stocks or funds, depending on what information is available at the time. To apply a stock split or stock dividend, you enter the appropriate ratio as prompted by the program. For example, to apply a 3-for-2 stock split, just type 3 <enter> 2 <enter>. To apply a 5% stock dividend, type 1.05 <enter> (the program assumes it's 1.05 to 1). A "reverse split" is OK (a warning message will be flashed) and can be used to "back out" a normal split or other distribution. For a mutual fund (or utility stock) distribution, you enter the net asset value or closing price as of the day BEFORE the distribution; then you enter the dollar amount (per share) of the distribution. The program will compute the required ratio. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 8 OF 10 D = Distribution or split (continued). A distribution or split need be applied ONLY ONE TIME. After entering the required parameters, you are prompted to verify Yes or No. A distribution or split will apply to ALL positions in the selected stock or fund, in ALL portfolios within the scope of the cata- log (normally all portfolios on the current disk or sub-directory). Thus, the number of shares and share prices will be adjusted automatically in ALL open and closed positions, not only in this but in other portfolios. C = Correction or Change. This function is used to correct any data item in the selected purchase entry, except the ticker symbol which cannot be changed. The program won't allow you to change something that doesn't make sense, such as annual income for a call option. Although you can change current prices from this screen, you should update current market prices from the Add/Delete Securities screen. To close a position, see below. S = Sell the selected purchase (close the open position). The selector bar must reside on an open position. The security cannot be a cash or margin account or commercial paper, as those transactions represent the account balance. Another menu will appear at the bottom of the screen, and it will have its own Help function for further explanation. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 9 OF 10 W = Wipe out (delete) the selected position. You can delete any transaction regardless of whether it is open or closed. It is better to close a posi- tion and leave it in the system for at least a year, rather than to simply delete an open position when a security is sold. This is to allow correct comparison of portfolio status from one date to another later date, and to provide information on closed positions (gains/losses) for tax purposes. The (W)ipe out function is mainly intended for purging a portfolio of the oldest positions that have been closed out, especially if the portfolio is full. It is also handy when breaking up a portfolio into two parts (you would of course make a copy first, using the DOS COPY command, and add it to the Portfolio Analyzer diskette or sub-directory under a different name, such as PERSON87 AND PERSON88). T = Tax rates. This function is to specify the Federal and State incremental tax rates for this portfolio. Each portfolio can have its own tax rates. The tax rates are used in computing the after-tax return on a security. ADD/DELETE PORTFOLIO TRANSACTIONS PAGE 10 OF 10 T = Tax rates (continued). Tax RATES are not to be confused with TAXABILITY, which is specified in the Add/Delete Securities screen. Taxability simply tells whether or not the income from a security is taxable on Federal and/ or State income tax returns, but doesn't tell the tax RATE. Income from a security can be taxed at different rates in different portfolios, and one or both of the rates can be zero or non-zero. The incremental tax rate is the amount of tax to be paid on the last dol- lar of income. Because tax rates are graduated (one pays higher tax rates on higher amounts of income), the incremental rate, sometimes known as the "tax bracket", is better to use for analysis than an average rate. After pressing T, the program will show you the current tax rates and ask is they are OK. If not, you can replace them with new rates which are entered as percentages. Press Esc to cancel the function with no change. H = Help - displays the information you are reading now. X = eXit back to the Master Menu. All data you have entered is saved on disk at this time.