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PFROI Shareware User Manual
Contents
1.0 Create Backup
2.0 PFROI Overview
3.0 Shareware Distribution
4.0 Caution
5.0 Exploring PFROI
5.1 Loading PFROI
5.2 Main Menu
5.3 Configure System
5.4 Purchase Information
5.5 Loading Portfolio Data
5.6 Editing Portfolio Records
5.6.1 Transaction Edits
5.6.2 Tax Rate Edits
5.6.3 Position/Price Edits
5.6.4 Deleting/Adding Valuations
5.7 Sorting Records
5.8 Printing Records
5.9 Symbol Mask
5.10 Autotax
5.11 Income Summaries
5.12 ROI
5.13 Saving Updates
6.0 Using PFROI
6.1 Return on Investment
6.2 Defining the Portfolio
6.3 Deposit/Withdrawal Rules
6.4 Starting the Portfolio
6.5 Transactions
6.5.1 Update Frequency
6.5.2 Transaction Codes
6.5.3 Security Symbols
6.5.4 Tax Lot Number
6.5.5 Transaction Charges
6.5.6 Manual Tax Input
6.6 Tax Rates
6.7 Valuations
6.8 Special Situations
6.8.1 IRA's/Keogh Accounts
6.8.2 Stock Options (Puts and Calls)
6.8.3 Employee Stock Options
6.8.4 Gifts/Inheritance
6.8.5 Dividend Reinvestment
6.8.6 Wash and Short Sale Tax Rules
6.8.7 Return of Capital
6.8.8 Exchanges of Securities
6.8.9 Money Market Funds
6.8.10 Other Assets
6.9 Merging Portfolio Files
7.0 Record Structure
8.0 Order Information
Techserve, inc., P.O. Box 70056, Bellevue, WA 98007
_
Limited Warranty
Techserve, inc. warrants this product to perform substantially as
demonstrated by shareware versions, subject to changes in new
updates. Persons who purchase a PFROI disk directly from
Techserve, inc. and who are not satisfied with this product may
obtain a full refund of purchase payment by returning disk and
documentation in original condition to Techserve, inc. within 45
days of receipt of product. Such return constitutes purchaser's
agreement to not use PFROI and to destroy any PFROI copies
obtained directly or indirectly. A disk received from Techserve
in damaged condition or with damaged files will be replaced one
time upon request if returned within 45 days of shipment.
Subsequent replacements will be made if accompanied with $10
payment for special shipping and handling.
Techserve, inc. does not warrant the accuracy of algorithms or
documentation used in or provided with this product. You use and
rely upon the results of this product at your own risk. You are
advised to always ascertain to your own satisfaction the validity
of results, as this product may, under some machine conditions or
data input, produce invalid results. This warranty is in lieu of
all others.
Copyright (C) 1985, Techserve, inc. All Rights Reserved.
_
3
1.0 Create Backup
A shareware disk copy of PFROI should contain the
following files:
PFROI.COM Shareware copy of PFROI.
PFROI.DOC This manual (abbreviated slightly from
full length manual for compactness).
DEMOPF Demo portfolio data file.
Copy these files to a working disk that you've
formatted with the "/S" option (i.e. A>format b:/s)
to put DOS boot files on the disk. If you have a
hard disk system, you should still make a backup, but
you may wish to copy only PFROI.COM to the hard disk
since it is the only file you will use regularly.
Consult your DOS manual if you are unfamiliar with
file copy procedures.
2.0 PFROI Overview
PFROI is the result of an effort to measure portfolio
performance in order to effectively set and meet long
range investment goals. The classical performance
measure for single investments in industry is "return
on investment" or "ROI". Determining ROI for a
portfolio of investments, however, is non-trivial.
Complicating factors include fluctuating dividend and
interest payments, non-uniform security growth rates,
as well as the periodic addition and/or withdrawal of
portfolio funds. Taxes further complicate the issue.
It is no surprise that the well-advertised major
portfolio software packages either don't address ROI
or don't compute it correctly. PFROI has solved this
problem, however, to compute portfolio and individual
security ROI both before and after taxes.
PFROI is additionally a complete portfolio manager.
It handles all usual portfolio transactions . . .
buys, sells, short sales, covers, dividends,
interest, splits, capital gains distributions, as
well as deposits and withdrawal of funds. PFROI
accepts most investment types, including stocks,
bonds, options, C.D.'s, money market funds, mutual
funds as well as trust accounts such as IRA's and
Keogh accounts. PFROI permits daily portfolio
valuations and provides securities' cost bases for
monitoring of unrealized capital gains. PFROI's
autotax feature also makes it an excellent tax
planning tool, while its income summaries can be
invaluable in preparing Tax schedules B and D.
_
4
When used to manage your investments and to help with
tax planning and preparation, PFROI is tax deductible
and can contribute to the deductibility of your
computer. We hope you find the use of PFROI pleasant
and profitable.
3.0 Shareware Distribution
PFROI is distributed as a "shareware" product. This
means that users are encouraged to pass copies of
PFROI on to others. This approach permits a user to
try the program before buying. It also keeps
marketing costs low, permitting a considerable cost
savings to the user as compared with conventionally
marketed software. However, if you wish to continue
to see "shareware" products, your support is required.
Thus if you use PFROI, please purchase an inexpensive
"update disk". This will ensure that you have the
latest version and also will support the development
of additional economical software. If you like
PFROI, pass demo copies on to friends. If you have
suggestions for improvement, let us know.
4.0 Caution
Although we think PFROI will be useful for the
investor, and we will do our best to minimize bugs,
we can't underwrite everyone's investment risk. Thus
you use and rely upon the results of PFROI at your
own risk. We suggest that you satisfy yourself with
test examples before committing to using and relying
upon the program on a regular basis.
5.0 Exploring PFROI
The best way to become familiar with the mechanics of
operating PFROI is to go through all the menus and
display screens and "push all the buttons". This
section leads you through this process.
5.1 Loading PFROI
Insert the working disk created in Section 1.0 into
drive A. Turn on your printer and adjust to top of
page. Then type: "A:PFROI" , followed by a carriage
return.
_
5
5.2 Main Menu
The main menu will appear as follows:
L) Load Portfolio I) Income Reports
T) Transactions C) Configure Sys.
V) Valuations P) Purchase Info
X) Tax Rates S) Save Updates
R) ROI Q) Quit
> _
5.3 Configure System
Select "Configure Sys." to get the following
sub-menu:
C) Colors
Data : White/Black
Title : Black/White
Header: Black/White
A) Account :
L) Lines/Page : 66
P) Printer Codes :
S) Save Configs.
> _
Try each selection:
Colors - If you have a color monitor, this
selection allows you to set the display colors to
your tastes. You may want to come back to this
section for further trials after you've seen the
other screens.
Account - Allows you to place an account name and
number on PFROI's reports.
_
6
Lines/Page - Controls the paging on the printer
output. It defaults to 66 lines/page, the typical
setting for most printer output. Change this
setting if you are using other than 6 lines/inch.
Printer Codes - Permits you to specify printer
setup codes (up to 14 keystrokes) which will be
sent to the printer prior to each printing
operation. The control codes you use will depend
upon your printer type. For an Epson printer,
Ctrl-O will set up the printer for compressed
print, or the sequence Esc G Esc E will set up
double-strike, emphasized printing. Try one of
these sequences or one appropriate to your printer.
Note that PFROI displays the PC's display icon for
the control codes.
Save Configuration - Allows you to save your
configurations on disk so you need not reconfigure
everytime you load the program. NOTE: This feature
may not be used when a portfolio file is loaded;
first quit PFROI and restart it before saving
configurations.
Hit "Esc" to exit the Configuration menu to the main
menu. In general, unless you are in the middle of an
operation, "Esc" will return you to the previous
screen.
5.4 Purchase Information
Selecting "Purchase Info." from the main menu dis-
PFROI's update order form. If your printer is on,
the form will print when you hit the "P" key. Try it
out to see if your printer setup codes are working.
_
7
5.5 Loading Portfolio Data
PFROI stores the data you provide on your portfolio
in a "portfolio file". Use the "Load Portfolio"
selection on the main menu to create a new portfolio
file, or to load an existing portfolio file. Note
the prompt for the portfolio file. A maximum string
of 30 characters is accepted as input in the
following format:
Portfolio file : d:filename
The filename may contain paths as permitted by DOS
2.0 or higher. The drive and path may be omitted if
the file is in the current directory. See your DOS
manual for use of paths.
If you forget to load or create a file with "Load
Portfolio", you will be prompted for a filename when
you attempt any processing which requires portfolio
data.
For this exercise, select "Load Portfolio" and load
the demo portfolio file for practice edits in the
next section:
DEMOPF <CR>
5.6 Editing Portfolio Records
The portfolio file stores portfolio data using the
following four record types :
Transaction Records
Tax Rate Records
Position/Price Records
Valuation Records
PFROI has display screens for each of these record
types from which the user may perform edits as
described below.
_
8
5.6.1 Transaction Edits
Transaction records are the most complex portfolio
record to edit. Select "Transactions" from the main
menu to obtain the transaction editing screen.
Notice that the second line on the screen provides a
summary of edit and command keys. For more detail on
these, hold down the "Alt" key and then hit the "H"
key. The edit keys are:
H-Arws Previous/Next Field
V-Arws Previous/Next Record
PgUp Page Screen Up
PgDn Page Screen Down
Home To First Record
End To Last Record
Ins Insert Record
Del Delete Record
Ctrl G Erase Field
Cursor Movement - The "H-Arws" and "V-Arws" refer to
the horizontal and vertical arrows on the number
keypad. Try moving the cursor around with these and
with the "PgUp", "PgDn", "Home" and "End" keys.
Toggle the "NumLock" key if nothing is happening.
Insert Record - Next, try inserting a record with the
"Ins" key. Note that the screen scrolled down to
make room for the new record. Now, enter some data,
moving the cursor to start with the first field:
Mo/Dy/Year - This field is really three fields.
Key in a date using the number keys at the top row
of the keyboard to avoid having to fiddle with the
"NumLock" key on the keypad. End each entry with
the "carriage return" key. Use a two digit entry
for the year. Note it is automatically extended to
four digits.
TAC (TransAction Code) - Before making an entry,
note that the valid code values are displayed at
the bottom of the screen when the cursor moves into
this field. A fuller description is obtained by
using the "Alt-H" (help) command or by referring to
section 6.5.2 of this manual. Since we are now
just concentrating on mechanics, enter "BUY" in
this field.
_
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5.6.1 Transaction Edits (cont'd.)
Symb (Security Symbol) - This field uniquely
identifies an asset in your portfolio. Typically,
a security's trading symbol is used. For this
exercise enter "ABC".
L# (Tax Lot Number) - This field is used to match
buy and sell transactions for determining capital
gains cost basis. Enter a number (try "2").
Description - This field is not used by PFROI in
any of its processing. It merely provides space
for a security name and/or a short note for a more
informative record. Enter "Am. BCast (2nd buy)".
ShrQty - This field holds the number of shares
involved in a transaction. Enter "100". Note that
there is no decimal point. Occasionally, however,
some transactions involve fractional shares. This
field can accommodate a fractional entry up to four
decimal places. Move the cursor back to the start
of the field and make an entry with a fractional
portion (e.g. "25.4321") to see what happens.
$Amount - This field contains the dollar amount of
a transaction. Enter a value (e.g. 2515.75). Note
that when you complete the entry, PFROI adds a
negative sign. PFROI uses the transaction code to
determine the sign on all ShrQty and $Amount
entries to avoid user error. In this case the sign
is negative because cash flows out of the portfolio
when a security is bought.
Est. Tax - Note that this field was skipped, with
the cursor moving on to the first field of the next
record. This is because a "BUY" transaction is not
an income generating transaction by itself. A tax
amount may be entered in this field for income
producing transactions (codes: IN+, IN-, DV+, DV-,
SLL, BYC, DV$, IN$, CGD, PIN) or by using the "TAX"
transaction code. When this is done, an "m"
appears in the right margin to indicate a "manual"
tax entry. Ordinarily, however, the user leaves
this field blank to be filled in later by PFROI
when the "autotax" command is given.
_
10
5.6.1 Transaction Edit (cont'd.)
Delete Record - Now that you've created a record, hit
the "Del" key to delete it. Note that the screen
scrolls up to fill over the deleted record unless it
happened to be the last record, in which case the
record is just blanked. Fill in some of the fields
in the last record and then delete it to test out
this feature.
Ctrl-G (Erase Field) - A value in any field of a
record may be erased by using Ctrl-G (^G). Note,
however, that if you want to change the value in a
field, the old value is erased as soon as you start
entering the new value. Thus Ctrl-G is primarily
useful when you want to erase an entry, such as a
"manual" tax entry, and then leave the field empty.
"No Data Required" - Not all transaction types
require data in every field. PFROI will skip over
fields not requiring input. To see this, move to the
blank record at the end of the file and enter a
"Deposit Funds" (enter "DPF" in TAC field)
transaction. Note that the Symbol, L# and ShrQty
fields are skipped in entering data. Note also that
a new blank last record is appended upon completion
of data entry into the current last record.
5.6.2 Tax Rate Edits
Return to the main menu by hitting the "Esc" key.
Select Tax Rates ("X") to view and edit the tax rate
records. These records have four fields in addition
to the date field:
HldPrd - Minimum Holding Period (in months) for
long term capital gains.
CGRate - Long Term Capital Gains Rate. This is
the fraction of long term capital
gains subject to ordinary income tax.
MaxLoss - Maximum capital loss deductible in any
one year.
TaxRate - User's Tax Rate (see section 6.6).
Use the same keys to move the cursor and edit these
records as were used for the transaction records.
Try them out.
_
11
5.6.2 Tax Rate Edits (cont'd.)
The tax records in the demo portfolio file are the
default values which are generated every time a new
portfolio file is created. Updating these and adding
new rates are discussed further in Sec. 6.6.
5.6.3 Position/Price Edits
You must go through the "Valuation" display to get to
the "Position/Price" edit. Return to the main menu
(Esc) and select "Valuations" to get the Valuations
screen. Note that this screen cannot be edited. It
is basically a summary of underlying "Position/Price"
records.
To view the security positions and prices underlying
a particular valuation, hit the Alt-R (for Review)
key combination. You will be prompted for a
valuation date. Input one of the dates shown on the
Valuation screen to get the corresponding
Position/Price display.
Upon reaching the Position/Price screen, note that
only the Price Field can be edited. Note also that
the "Cost Base" and "Gain/-Loss" fields allow you to
easily compare current valuations with the amount
you've invested.
Try changing some of the prices to see the effect on
the valuation field. Try "Alt-T" to get totals on
the last line. Use "Esc" to return to the Valuation
screen. Note that the valuation for that date has
changed to reflect the prices you entered.
5.6.4 Deleting/Adding Valuations
The Alt-D and Alt-A keys are used respectively to
delete excess old valuations and add new valuations.
Try deleting a valuation, but first note its date.
Deleting the valuation also deletes the underlying
position/price record. After deleting a valuation
use Alt-R to see if you can still see the underlying
position/price records. You can't. Deleting old
valuations prevents a build-up of excess valuation
and position price records.
_
12
Now try adding a valuation (Alt-A). Use any date,
provided it is not earlier than the first transaction
in the portfolio. Wait while PFROI computes the
portfolio position for the specified date.
The position/price screen is displayed upon
completing the computation. Note that the price
fields are empty, unless you specified an existing
valuation, in which case any existing prices are
used. Enter prices to complete position valuations.
Escape to the valuation screen to see the valuation
just added.
5.7 Sorting Records
In the review in the previous section, we skipped
some of the commands shown on the "Keys" display
lines. The first of these is the "Sort" (Alt-S)
command. It allows you to sort Transaction and Tax
Rate records by date to maintain orderly records. Go
to the Transaction or Tax Rates screen to try the
sort command. First insert a blank record or other
out-of-sequence record. Examine the results.
PFROI automatically sorts records before operations
such as the autotax operation which require sorted
records to work properly. However, one good use of
the sort function is to find incomplete records.
These will be sorted to the end of the list. It is a
good idea to sort and then examine your last few
records if PFROI is giving unexpected results.
5.8 Printing Records
All four record types (Transactions, Tax Rates,
Position/Price, Valuations) may be printed by
invoking the Print (Alt-P) command from the
appropriate record screen. For Transaction and Tax
Rate records you are prompted for start and end
dates. Try the print command for all record types.
(Note: Certain screens print using the PC's BIOS
print-screen routine. These may encounter problems
if you are running another program in background
which manipulates BIOS status bytes or interrupts.).
_
13
5.9 Symbol Mask
The "Mask" command ("Alt-M") from the transaction
edit allows you to isolate one security from the rest
of the portfolio to review and print transactions,
and to compute an ROI. The current setting of the
symbol mask is indicated in the title line (top line)
of the transaction edit. The mask should be set to
".ALL." to view all the securities in the portfolio.
Try the "Alt-M" command and respond to the prompt
with the symbol of one of the securities in the demo
portfolio file. Reinstate the ".ALL." symbol mask by
reinvoking the "Mask" command and then hitting the
carriage return in response to the prompt.
5.10 Autotax
The "taX" command (Alt-X) from the transaction edit
screen invokes the Autotax computation.
Before trying this feature, first escape to the main
menu and reload DEMOPF using the "Load Portfolio"
command. This will restore any records which might
have been altered or deleted in the previous
exercises and which may be needed to illustrate
Autotax features.
Now return to the Transaction edit screen. Move the
cursor to any record dated 1982. Hit Alt-X. Wait
for the records to be redisplayed.
Observe ("page" if necessary) that there are now
values in the "Est. Tax" fields of all transactions
from 1982 down to the end of the portfolio for which
you would expect there to be a tax liability or
credit (e.g.: interest, dividends, sell, and buy to
cover transactions).
Note that some new records with the transaction codes
"TAX", "SCO", and "LCO" have appeared. These records
are a year-end capital gains tax adjustment and short
and long term loss carryovers. The tax adjustment
reconciles the taxes on Schedule D netted capital
gains with the sum of estimated taxes on individual
capital gains transactions.
_
14
5.11 Income Summaries
Select "Income Summaries" from the main menu to get
the following sub-menu:
C) Capital Gains
D) Dividends
I) Interest
> _
Try each selection. You will be prompted you to
specify a year. An annual report of the selected
type will be generated on your printer. For each
exercise be sure to select a year containing at least
one of the income transactions of interest so there
is meaningful output. Examine the reports closely
and note the contents.
5.12 ROI
Now you are ready to try the ROI computation.
Select "ROI" from the main menu. A version of the
valuation screen is displayed to aid in specifying a
start and end date for the ROI.
An error message is displayed if an invalid date is
specified. Hitting any key (except Esc) will restart
the ROI process. "Esc" returns you to the main menu.
Initially try using the first and last valuations for
the start and end dates. Because the ROI calculation
is an iterative computation involving many
transactions, there will be some delay while the
computer works. When the calculations are complete,
the ROI results are displayed. Note that sources of
income are summarized and ROI is shown both before
and after taxes.
_
15
To generate an ROI on an individual security, go to
the transaction edit screen to change the symbol
mask, then return to the ROI screen. If the security
is one you no longer hold, note the buy (or short
sell) date. This date can be used as the start date
of the ROI. Likewise, the sell (or buy to cover)
date of the security can be used as the end date of
the ROI. PFROI will search for valuations on these
dates. If none are found, PFROI will select default
valuations which straddle the dates specified.
When the ROI summary is displayed, note the "Funds
Added" and "Funds Removed" categories. For an ROI of
the entire portfolio (".ALL." Symbol Mask), "Funds
Added" signifies deposit transactions, while "Funds
Removed" signifies withdraw transactions or cashing
of dividends. For an individual security ROI, "Funds
Added" signifies buying into the security, while
"Funds Removed" signifies selling out of the
security, or cashing of dividends.
5.13 Saving Updates
The "Save" selection on the main menu saves portfolio
changes to disk. You should "Save" occasionally to
minimize data loss should your PC malfunction or lose
power. PFROI does not save changes to the demo
portfolio in order to preserve its integrity.
_
16
6.0 Using PFROI
You should now be familiar with the mechanics of
operating PFROI. This section is intended to give
you the information needed to get useful results.
6.1 Return on Investment
Return on investment (ROI) is one of the most common
measures of investment performance. It is computed
by PFROI using the internal rate of return method.
For those not familiar with using or computing ROI,
it is easiest to think of it as an interest rate.
The interest rate you receive on a continuously
compounded savings account or certificate of deposit
is in fact the ROI on that account or CD.
PFROI computes the return on investment on a
portfolio by determining the interest rate which
would generate an identical ending value in a savings
account with the same history of deposit and
withdrawal of funds as the portfolio. The ROI on an
individual security is computed in a similar fashion
except that in lieu of deposits and withdrawals, each
transaction in the security is reduced to a "cash
flow" and the resulting cash flows (plus start
valuation and ending valuation) are used to compute
the ROI.
6.2 Defining the Portfolio
Before starting a portfolio file, you should define
the portfolio to yourself. This is a mental
exercise, but will help to prevent errors in
determining the correct entries to make to the
portfolio file. The transactions most susceptible to
error in this regard are "deposit" and "withdraw"
transactions.
_
17
6.2 Defining the Portfolio (cont'd.)
To define the portfolio, first consider it as a
separate financial entity from yourself. Now define
which of your assets are to be included in the
portfolio. It may include a single brokerage account
or may include several types of accounts. Some
possibilities are:
a) Securities (stocks, bonds, T-bills, etc) and
funds held in an account with a broker.
b) Securities held in a safe deposit box.
c) A money market account.
d) A mutual fund account.
e) A stock subscription account (e.g., as part of a
dividend reinvestment plan).
f) A savings account or C.D.
6.3 Deposit/Withdrawal Rules
Once the portfolio is defined, you can determine what
transactions involve "deposit" or "withdrawal" of
funds to or from the portfolio. The basic rules to
follow are:
a) Enter a "deposit" transaction whenever the
portfolio owner (you) adds funds to a portfolio
account.
b) Enter a "withdraw" transaction whenever the
portfolio owner (you) removes funds from a
portfolio account.
Note that if funds are transferred from one account
within the portfolio to another account within the
portfolio, it is good practice to enter a "withdraw"
transaction from the first account and a "deposit"
transaction to the second account. This may seem
unnecessary because the value of the overall
portfolio remains unchanged. However it ensures
accurate recording of any time lag that might occur
between the withdrawal and deposit transaction. It
also facilitates any later reconciliation with
account statements.
_
18
6.3 Deposit/Withdrawal Rules (cont'd.)
As an example, assume that the portfolio is defined
to consist of a brokerage account, securities in a
safe deposit box, and a money market account
(separate from the brokerage account). Some possible
"deposit" and "withdraw" transactions with this
portfolio are as follows:
a) You send a $2000 personal check to your broker
to credit to your account. This is a "deposit"
transaction because new funds are being injected
into the portfolio.
Note: This is a "deposit" transaction even if
the $2000 is to pay for 100 shares of "XYZ " you
bought last week. In this case you must also
enter a "buy" transaction. The "buy"
transaction will debit the portfolio for the
$2000 and credit it for the 100 shares. The net
effect is that the $2000 credit of the "deposit"
offsets the $2000 debit of the "buy" leaving the
portfolio with a net gain of 100 shares.
b) Your broker sends you $3000 from your account.
This is a "withdraw" transaction because funds
are being withdrawn from the portfolio.
Note: This is a "withdraw" transaction even if
the $3000 are proceeds from the sale of 100
shares of "XYZ". In this case you must also
enter a "sell" transaction. The "sell"
transaction credits the portfolio for the $3000
received from the sale, and debits the portfolio
for the shares sold. The net effect is that the
$3000 debit of the "withdraw" transaction
offsets the $3000 credit of the "sell"
transaction. The cash balance is unchanged, but
the portfolio now has 100 fewer shares of "XYZ".
c) You send a check for $7000 from your money
market fund to your broker to credit your
account. This is a "withdraw" transaction from
the money market fund (enter fund name in
security field) and a "deposit" transaction to
the brokerage account (enter broker name in
security field).
_
19
6.3 Deposit/Withdrawal Rules (cont'd.)
d) You receive a $60 quarterly dividend check from
AT&T for the 200 shares you hold in your safe
deposit box. You deposit the check in your
checking account (not part of your portfolio!).
Ordinarily two transaction entries would be
needed:
1) A "dividend earned" (DV+) transaction to
indicate that the dividend was received.
2) A "withdraw" (WDF) transaction to indicate
that the funds were removed from the
portfolio.
However, since this situation occurs frequently,
a transaction code, "DV$" is provided which
combines both of these transactions. A similar
code, "IN$", is also provided for interest
payments (e.g. on bonds) which are not retained
in your portfolio. Note, however, that if the
stock in this example was in your brokerage
account and the dividend was received and
retained in your brokerage account, only one
transaction would be required . . . a "DV+"
transaction.
6.4 Starting the Portfolio
To start the portfolio file, gather records of
portfolio transactions you've made to date. Old tax
schedules B and D are good sources for these if your
cannot find all of your old broker state ments or
transaction slips.
Use "Load Portfolio" on PFROI's main menu to create
the new portfolio, then select "Transactions" to
input your transaction records.
The first transaction entered must be a "deposit"
transaction (remember, you had to get money into the
portfolio to "buy" that first security). Enter
subsequent transactions until the portfolio is up to
date. Refer to section 6.5 if uncertain about the
proper transaction code to use, or to section 6.9 if
you have a special situation such as inherited stock.
When you are done entering transactions, use the
"Sort" command (Alt-S) to sort the transactions in
case some were entered out of date order.
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6.4 Starting the Portfolio (cont'd.)
It is possible to simplify the startup process if you
are willing to dispense with portfolio history. To
do this, however, you must still establish your
current portfolio position and the purchase dates and
costs associated with securities currently held. The
process is as follows:
1) Determine the "buy" date and purchase cost of
all securities currently in the portfolio. (This
is not redundant effort, you will need this
information for the IRS when you sell). Make
two entries into the portfolio file for each
security:
a) A "deposit" transaction for amount of the
purchase cost.
b) A "buy" transaction for both the share
quantity and purchase cost.
Note that the dollar amounts for the deposit and
buy transactions offset each other to produce a
zero net cash position.
2) Enter your portfolio's latest reported cash
position as a "deposit" transaction using the
date on which the cash position was reported as
the transaction date.
On completion of initial portfolio data entry, go to
the "Valuation" screen and do an "add valuation".
Check the results versus your latest broker
statements or other records. If you find a valuation
discrepancy, check to see that prices in the
valuation are the same as on the broker statement
being used for comparison. If there is a discrepancy
in share position, a share transaction such as a buy,
sell or split was probably inadvertantly omitted.
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6.5 Transactions
6.5.1 Update Frequency
The normal frequency for PFROI portfolio updates is
monthly, when you receive your broker statement. The
typical investor should not require much more than
five to ten transactions per month, involving no more
than ten to fifteen minutes per month. More time
will be required if you have several brokers,
multiple portfolios or are a heavy trader.
6.5.2 Transaction Codes (TAC)
The valid transaction codes and their use are as
follows:
DPF DePosit Funds - Use whenever portfolio owner adds
funds to a portfolio account.
WDF WithDraw Funds - Use whenever portfolio owner
removes funds from a portfolio account.
IN+ INterest earned - Use whenever interest is
credited to and retained in a portfolio account.
IN- INterest charged - Use whenever a portfolio
account is debited for interest.
IN$ INterest ca$hed - Interest earned, but cashed
rather than retained in portfolio. Example: You
receive a semi-annual interest payment on a T-bill
in your portfolio and deposit it in your checking
account, which is not part of your portfolio.
BUY BUY security - Use whenever a security (stock,
bond, T-bill, option, etc) is purchased into the
portfolio.
SLL SelL security held Long - Use whenever a
security is sold from the portfolio.
DV+ cash DiVidend earned - Use whenever the port-
folio is credited with a dividend.
DV- cash DiVidend charged - Use whenever the port-
folio is debited for a dividend on a stock held
short.
DV$ DiVidend ca$hed - Dividend earned, but cashed
rather than retained in portfolio. (Like IN$,
but for dividend).
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6.5.2 Transaction Codes (cont'd.)
SP+ SPlit Long - Use whenever stock held long in the
portfolio splits or has a stock dividend.
Fractional shares may be entered up to 4 decimal
places. If you are given cash in lieu of a
fractional share, the cash amount should be
entered as a dividend transaction, with a manual
"est. tax" entry of zero, if you determine the
payment is tax free under current law.
SP- SPlit short - Use whenever stock held short in
the portfolio splits or has a stock dividend.
SLS SelL Short - Use whenever security sold short.
BYC BuY to Cover - Use whenever a security is pur-
chased to cover a short position.
CGD Capital Gains Distribution - Use whenever a
capital gains distribution is received, such as
from a mutual fund. Capital gains distributions
are taxed at capital gains rates.
PIN Phantom INterest - Imputed interest earned on
zero coupon ("original issue discount") bonds.
This entry is required to get correct tax
reporting, but does not affect valuations. Note:
A zero coupon bond should be valued at market
price, if available, otherwise purchase price plus
phantom interest earned to date should be used. A
"SLL" transaction should be used on redemption or
sale of the bond. PFROI automatically adds
phantom interest on the bond to its cost basis in
order to generate correct capital gains. You
should be careful, however, to use a unique symbol
for each bond if several zero coupon bonds are
held over the same time period. This will prevent
double counting of phantom interest in the cost
basis of more than one bond.
TAX TAX adjustment - Use whenever a tax adjustment at
year-end is needed to force total taxes in the
"Est. Tax" field for the year to equal Schedule
D taxes on portfolio capital gains. Entries in
the "Est. Tax" field only affect the "After Tax
ROI" and do not affect portfolio valuation or the
"Income Summaries". Using "AutoTax" auto-
matically inserts a tax adjustment record to
account for the netting process of Schedule D on
capital gains, so normally there should be no
need for a manual TAX entry.
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6.5.2 Transaction Codes (cont'd.)
SCO Short term loss CarryOver - Use whenever tax
schedule D indicates a short term loss carryover.
LCO Long term loss CarryOver - Use whenever tax
schedule D indicates a long term loss carryover.
The SCO and LCO records are automatically
inserted by "AutoTax" so normally there should be
no need for manual entries. However, if a manual
entry is needed, the date 1/2/Year must be used
since 1/1/Year is reserved for autotax generated
carryovers. Note that the loss carryover amount
is placed in the ShrQty field of the transaction
record.
6.5.3 Security Symbol (Symb)
PFROI uses the security symbol in the transaction
record to uniquely identify a security. In general,
the trading symbol of a security should be used in
this field, although any symbol may be used provided
each security in the portfolio has a unique symbol.
6.5.4 Tax Lot Number (L#)
PFROI uses the tax lot number, along with the stock
symbol, to match buy and sell transactions and short
sale and cover transactions in order to compute
capital gains or losses.
A "new" tax lot number must be assigned whenever a
"Buy" or "Sell Short" transaction is entered. A tax
lot number qualifes as "new" if there is no "open"
transaction with the same security symbol and lot
number. An "open" transaction is any "Buy" or "Sell
Short" transaction for which the stock position (long
or short as appropriate) has not yet been zeroed out
by matching "Sell" or "Buy to Cover" transactions.
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6.5.4 Tax Lot Number (cont'd.)
Note that a tax lot number is used only once in
opening a stock position, but may be used several
times in the process of closing the stock position.
For example:
Mo/Dy/Year TAC Symb L# Descript. ShrQty $Amount Est. Tax
== == ==== === ===== == ========== ========== ============ ========
2/ 4/1981 BUY XYZ 3 XYZ Inc. 400 -20000.00
7/ 5/1983 SLL XYZ 3 XYZ Inc. 100 6500.00
3/ 5/1984 SLL XYZ 3 XYZ Inc. 200 14000.00
5/22/1984 SLL XYZ 3 XYZ Inc. 100 7800.00
Note also that a "BUY" transaction is not closed
until at least one "SLL" transaction with
corresponding tax lot number is entered. Review the
demo portfolio file DEMOPF for more examples of tax
lot number usage.
6.5.5 Transaction Charges
Commission charges and transaction taxes should be
included in the "$Amount" entry for "Buy", "Sell",
"Buy to Cover", and "Sell Short" transactions.
6.5.6 Manual Tax Input
Most PFROI users will not need to manually input
estimated taxes for transactions. Occasionally,
however, there are special situations due to the
complexity of our tax laws which require manual tax
input. One of these, for example, involves a tax
exemption on dividend reinvestment in public
utilities (see section 6.8.5). You may have other
special tax situations where a manual tax input is
required to produce the correct estimated tax. Note
that a manual tax entry of "zero" may be entered to
designate a transaction as tax free. These "tax
free" transactions will not be reported on the
dividend, interest, or capital gains reports.
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6.6 Tax Rates
Before you start using PFROI's "AutoTax" feature, you
should update PFROI's initial default tax rate
records to reflect your own marginal tax rates. The
default tax rate records are as follows:
Mo/Dy/Year Hld Prd CGRate MaxLoss TaxRate
== == ==== ======= ====== ======= =======
1/ 1/1970 6 0.500 3000 0.250
1/ 1/1977 9 0.500 3000 0.250
1/ 1/1979 12 0.400 3000 0.250
6/23/1984 6 0.400 3000 0.250
Since your personal tax rate probably varies from
year to year, you should insert a tax rate record for
each year in which your portfolio is active. The
date of this record should be January 1st. The
reason for this is that whenever AutoTax is invoked,
PFROI searches for the first tax rate record
chronologically prior to the transaction. Setting
the record date to 1/1 thus ensures that the record
applies for the whole year. An exception to this
rule is whenever there is a mid-year tax law change,
as occurred in 1984.
6.7 Valuations
PFROI permits a total of 48 valuations. It is
recommended that valuations be kept on a yearly basis
except for the current year, for which you may wish
to keep more frequent valuations. Use the "Delete"
valuation command to delete old valuations.
Valuations are normally computed (by default)
starting from the first portfolio transaction. This
is indicated by the display of "FirstTA" in the
Valuation title header. For long files, valuations
can be computed starting from the prior valuation by
hitting "Alt-B" to change the valuation base. Note
that that "PriorVal" is displayed in the title header
when this is done. Toggling "Alt-B" a second time
will return the valuation base to "FirstTA".
Whenever a transaction is modified or a new
transaction is inserted, all subsequent valuations
must be regenerated using the "Add" command to
incorporate the change. This is a good reason to be
careful to not overlook transactions or make entry
errors when inputting original transaction data.
Fortunately, when valuations must be regenerated, the
market prices in the original valuation are carried
over to the new valuation.
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6.8 Special Situations
The following special situations are covered in the
manual which comes with a PFROI "update" disk:
6.8.1 IRA's and Keogh Accounts
6.8.2 Stock Options (Puts and Calls)
6.8.3 Employee Stock Options
6.8.4 Gifts/Inheritance
6.8.5 Dividend Reinvestment
6.8.6 Wash and Short Sale Tax Rules
6.8.7 Return of Capital
6.8.8 Exchanges of Securities (Mergers/Divestitures)
6.8.9 Money Market Funds
6.8.10 Other Assets
6.9 Merging Portfolio Files
Some users may find it convenient to keep
transactions from separate accounts in separate
portfolio files. This may occur, for example, if you
use more than one broker to diversify brokerage risk.
The utility program "PFMERGE.COM" is provided on
PFROI's update disk to permit you to periodically
merge these separate files into a "master" portfolio
file to determine your overall return on investment.
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7.0 Record Structure
PFROI uses a 68 byte record for the portfolio file.
The record structure is as follows:
Field # bytes Description
------ ------- -------------------------
RecType 1 Record Type (0=Tax;1=TA;2=Pos/Prc;3=Val)
FwdPtr 4 Link pointer
BkwdPtr 4 Link pointer
Month 2 Month (integer)
Day 2 Day (integer)
Year 2 Year (integer)
CodeIdx 1 Transaction code index
Symbol 6 Security symbol (5 char string)
L# 2 Tax Lot Number
Descrip. 21 Security Name/Note (20 char string)
ShrQty 6 Share Quantity (real)
$Amount 6 Transaction Amount (real)
Est. Tax 6 Estimated Tax (real)
Flag 1 Processing Flags
Dcml 1 Decimal place
Spare 1 Spare byte
Spare Int 2 Spare integer
-------
68
The maximum number of records (of all types) which
can be processed by PFROI is dependent upon your PC's
installed memory. About 2000 records can be handled
with 256K-bytes RAM, and about 5000 records with
512K-bytes RAM.
8.0 Update Order Information
Description $U.S.
=========== =======
PFROI Diskette (full manual on disk) $ 10
PFROI Diskette with printed manual $ 20
Minimum System Reqt.: IBM PC or compatible
computer, DOS 2.0 or higher, 128K RAM, printer.
(disks double-sided 5 1/4" format unless otherwise
requested. Priced subject to change without notice)
Send payment with name and address to:
Techserve, inc., POBox 70056, Bellevue, WA 98007
or call (206) 747 5598. (VISA or MC accepted).
Inquire also about our other investment software.
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