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Basic concepts

In this chapter, you will find a concise but clear explanation of several basic concepts. Portfolio performance is all about numbers. It is easy to completely miscalculate or misinterpret these numbers, if you don't understand the underlying assumptions.

  • Financial terminology: Understanding basic financial terminology is crucial for optimal usage of PP and this manual. This page contains a few links excellent sites.
  • PP terminology: This glossary is a simple alphabetically sorted list of terms, acronyms, column headings, and other relevant vocabulary used in PP, accompanied by their respective definitions.
  • System overview: Provides a bird's-eye view of how PP operates. It discusses all components and their interactions, with a focus on the main goal: calculating the portfolio's performance.An example is also provided.
  • Transaction: A financial transaction is an agreement between a buyer and seller to exchange goods, services, or assets for payment. In case of PP, the exchange is about securities. There are security transactions such as buy, sell delivery (inbound), and delivery (outbound); deposit transactions such as deposit, removal, interest, interest charge, fees, fees refund, taxes, tax refund; and dividend transactions.
  • Reporting period: The (reporting) period is the time slice that is taken into account for reporting (calculations, graphs, statistics). It's very important that you realize that for every performance calculation a reporting period is taken into account, even if you haven't set one explicitly.
  • Purchase value: The Purchase Value of a security is the summed value of each buy (+) and sell (-) transaction of that security, taken into account the reporting period. The value of a transaction includes the taxes and fees; sometimes also called “Net Transaction Value”.
  • Performance: Measuring your portfolio's performance may seem straightforward, but it involves a range of concepts and calculation techniques that require explanation.
  • Historical prices: To calculate performance, PP requires two types of historical prices: the historical quotes of securities and in case of foreign investments, the historical exchange rates for currencies.