PEPS (Personal Equity Plans)
These allow investment in a number of shares and carry various tax benefits, including the receipt of dividends without paying income tax on the income and sales free from capital gains tax on the profit.

Pacific Basin Fund
A fund that invests primarily in the stocks of companies located in the Pacific Basin, which includes Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, and Taiwan.

Pacific Clearing Corporation (PCC)
The clearing corporation of the Pacific Stock Exchange.

Pacific Ex Japan Funds
A fund that invests primarily in the stocks of companies whose primary trading markets or operations are concentrated in the Pacific region (including Asian countries), and which specifically does not invest in Japan.

Pacific Stock Exchange (PSE)
This exchange operates in San Francisco and Los Angeles.

Par Value
A value that a corporation assigns to its security for bookkeeping purposes.

Participating Preferred
Preferred stock whose holders may "participate" with the common shareholders in any dividends paid over and above those normally paid to common and preferred stockholders.

Pass-Through Security
Instrument representing an interest in a pool of mortgages. Pass-throughs pay interest and principal on a monthly basis.

Passive Income
Income from an investment in a trade or business in which the investor does not "materially participate." Material participation requires regular, continuous and substantial involvement in the operations of the activity.

Payment Date
The day on which a mutual fund pays income dividend or capital gains distributions to its shareholders.

Penalty Plan
A mutual fund accumulation plan in which sales fees for the entire obligation are deducted from shares purchased in the first few years that the plan is in effect. In the event that the investors redeem the shares after a short time, only a small portion of the purchase price will be refunded. Sales charges and penalty plans are regulated by the Investment Company Amendments Act of 1970.

Penny Stocks
Extremely low-priced securities that trade over the counter.

Per capita
A method of dividing an estate that gives one equal share to each person in a class of people who are all related in the same degree of relationship to the deceased person. For example, all grandchildren take equal shares regardless of how many children the deceased person had.

Per stirpes
A method of dividing an estate among a class of people based on representation at a closer degree of relationship to the deceased person than the degree of the class itself. For example, grandchildren take only the shares that their respective parents would have taken.

Performance
A measure of how well a fund is doing. Two commonly used mutual fund performance measures are yield (which measures dividends) and total return (which measures dividends plus changes in net asset value).

Periodic Payment Plan
A plan in which an investor agrees to make monthly or quarterly investments in a mutual fund as a method of accumulating shares over a period of years. Fixed periodic contributions result in dollar cost averaging.

Personal Assets
Assets acquired for your use and enjoyment, including your home, automobiles, furnishings and similar possessions.

Phantom Interest
The yearly accreted interest that a zero-coupon security is presumed to pay each year you hold it even though payment of interest isn't made until the zero matures.

Pink Sheets
Daily publication providing dealer names and quotes on penny stocks. It is actually printed on pink paper.

Plus-Tick Rule
SEC rule that states that no short sale may be made when the last trade on the security was a minus tick.

Point
A price movement of one full increment. For example, a stock rises one point when its price goes from 23 to 24.

Pooling
Pooling is the basic concept behind mutual funds. A fund pools the money of thousands of individual and institutional investors who share common financial goals. The fund uses this pool to buy a diversified portfolio of investments

Portfolio
A collection of securities owned by an individual or an institution (like a mutual fund). A fund's portfolio may include a combination of stocks, bonds, and money market securities.

Portfolio Manager
The individual who is responsible for managing a mutual fund's assets.

Portfolio Theory
The management of a portfolio based on quantitative analysis, where the selection of securities in a portfolio is made as a result of a mathematical assessment of the risk and return against the market as a whole and/or by reference to the risks or returns determined by the client for the portfolio. Portfolio theory will assess risk-free returns and the likelihood of returns made by market timing, determining the benefits of investments by their volatility (beta coefficient) or dispersion (risk) and the capital asset pricing model.

Portfolio Turnover
A measure of the trading activity in the fund's portfolio of investments. In other words, how often securities are bought and sold.

Position Limits
The maximum number of option contracts that may be held on the same side of the market for a particular security. The number may vary depending on the security.

Pre-Existing Conditions
Medical conditions that existed, were diagnosed or were under treatment before you took out a policy. Medical, disability and long-term care insurance policies may limit or exclude benefits payable for such conditions.

Pre-Tax Rate of Return
The rate of return before income taxes (and any applicable tax credits) are taken into account. See After-tax rate of return.

Precious Metals Fund
A fund that seeks an increase in the value of its holdings by investing at least two-thirds of its portfolio in securities associated with gold, silver, and other precious metals. Also known as "gold funds."

Preemptive Right
A right, sometimes required by the issuer's corporate charter, by which current owners must be given the opportunity to maintain their percentage ownership if additional shares of the same class are issued. Additional shares of the soon-to-be issued security are offered to current owners in proportion to their holders before the issue can be offered to others. Usually one right is issued for each outstanding share. The rights are used to subscribe to the additional shares at a predetermined cash amount.

Preference Shares
These are normally fixed-income shares whose holders have the right to receive dividends before ordinary shareholders but after debenture and loan stockholders have received their interest.

Preferred Stock
Stock that represents ownership in the issuing corporation and that has prior claim on dividends. In the case of bankruptcy, preferred stock has a claim on assets ahead of common stockholders. The expected dividend is part of the issue's description.

Premium
(1) If the market price of a new security is higher than the issue price, the difference is the premium. If it is lower, the difference is called the Discount. (2) The cost of purchasing or selling a traded option.

Premium Bond
A note or bond selling at a price above par.

Prenuptial Agreement
An agreement entered into by prospective spouses before marriage, in which the property rights of one or both are determined.

Prepayment Risk
The possibility that, as interest rates fall, homeowners will refinance their home mortgages, resulting in the prepayment of GNMA securities, and possible decline in net asset values of GNMA Funds.

Price Spread
A spread in which the two options have the same expiration date but have different exercise or strike price.

Price/Earnings Ratio
The current share price divided by the last published earnings per share, where earnings per share is net profit divided by the number of ordinary shares.

Primary Dealer
Any of 40 firms recognized by the Treasury Department as eligible to bid on Treasury and agency securities when they are initially issued and to make a market for secondary buyers.

Primary Market
(1) The initial offering of certain debt issues. (2) The main exchanges for equity trading.

Principal
a.) The amount of money that is financed, borrowed or invested, generally to distinguish this amount from the interest or other earnings derived from the principal. Earnings; b) A brokerage firm when it acts as a dealer and marks up a purchase price or marks down a sale price when reporting the execution.

Private Company
A company which is not a public company and does not offer its shares to the general public.

Private Placement
An issue that is offered to a single or a few investors as opposed to being publicly offered.

Privatization
Conversion of a state run company to public limited company status often accompanied by a sale of its shares to the public.

Probate
Proceedings involving a court of law that pertain to the administration and distribution of an estate. This includes determination of the validity of a will, appointment of an executor or administrator, and settlement of the estate.

Probate Price
The price used to assess the value of shares for inheritance tax purposes. Calculated on the "quarter up" principle. That is, instead of taking the Mid Price in the Official List, the difference between the two prices (bid and offer) given under "quotation" is divided by four, and the result added to the lower of the two prices.

Professional Management
The pool of shareholder dollars invested in a fund is managed by full-time, experienced professionals who decide which securities to hold, when to buy, and when to sell.

Program Trading
Professional investors and institutions often use computer-generated buying and selling programs as part of their trading activities. These normally buy or sell shares, options or futures, on the basis of market movements and operate automatically. Can cause considerable market volatility.

Property Ownership
How legal title to property is held (for example, sole ownership, joint tenancy, tenancy by the entirety, tenancy in common, or in trust).

Prospectus
The official document that describes a mutual fund. It contains information required by the Securities and Exchange Commission on such subjects as the fund's investment objectives, policies, services and fees. A prospectus must be given to every investor. In the US, a more detailed document, known as "Part B" of the registration statement, (or "Statement of Additional Information,") is available at no charge upon request.

Proxy
A form and a process for voting via the mail, permitting stockholders to vote on key corporate issues without having to attend the actual meeting.

Proxy Fight
An attempt by a dissident group to take over the management of a corporation. The group sends proxies electing them to the board; the current management sends proxies favoring them. The shareholders cast their votes by selecting one proxy or the other.

Public Limited Company (PLC)
A public company limited by shares and having a share capital, and which may offer shares for purchase by the general public. Only PLC's may qualify for listing or trading on the USM on the London Stock Exchange.

Public Market
The listed exchanges through which zero-coupon investments can be purchased and sold.

Public Offering Date
The first day the new issue is offered to the public, on or shortly after the effective date.

Purchase Price
The amount paid to purchase a Treasury or agency obligation.

Purchasing Power Parity
Purchasing power parity between two currencies exists when their exchange rates are in equilibrium with each other, i.e. their domestic purchasing powers at that exchange rate are equivalent ('at parity'). For instance, the exchange rate of £1 = $1.60 would be in equilibrium if £1 could buy the same amount of goods and services in the UK as $1.60 would buy in the US. If indeed they are equivalent in terms of purchasing power at that exchange rate, one says that PPP holds. Otherwise one currency is overvalued with respect to the other. PPP theory is important in international economics and finance. The basic underlying idea is that arbitrage forces will come into play if one currency is overvalued relative to the other, and these will eventually lead to the equalisation of goods and services prices internationally (taking into account the exchange rate). As such, PPP theory is a 'law of one price'. In reality, PPP theory seems to hold relatively well in the long-run, but is quite unreliable in the short-run. It is especially deficient as a theory in that it cannot explain the high volatility in exchange rates and prolonged divergences from PPP. Other theories that build on PPP have been introduced which are slightly more satisfactory - overshooting for example. Probably a major reason for the unsatisfactory performance of PPP theory is that international comparisons and estimates of the price of equivalent baskets of goods and services are extremely difficult to make accurately.

Put
An option that permits the owner to sell a standard amount of an underlying security at a set price for a predetermined period.

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