Definitions Starting with "D"

D-Mark

D-mark is slang for deutschmark, the national currency of Germany until it joined the European Union in 2002. For example, let's say you're at a cocktail party looking to impress some Wall Street currency traders. Read more

DAGMAR

DAGMAR is a marketing term that stands for "define advertising goals, measure advertising results. " For example, let's assume that Company XYZ wants to measure the effectiveness of the marketing campaign for its latest Widget. Read more

Daily Cut-Off

Daily cut-off is a term signifying the end of the trading day for foreign exchange markets. For example, let’s look at the markets for Japanese and American currencies. Read more

Daily Factor

Daily factor is the amount of yield earned in a day. Recall that yield is the percentage interest an investor would earn if he or she purchased a given bond at its current market price. Read more

Daily Money Manager (DMM)

A daily money manager (DMM) is a person who manages day-to-day financial responsibilities for clients. For example, let’s assume John Doe is elderly and lives alone. Read more

Daily Trading Limit

A daily trading limit is the maximum gain or loss allowed on a derivative or currency in one trading day. For example, let's say that a forward contract on Company XYZ stock has a trading limit of X. Read more

Daisy Chain

In finance, a daisy chain is an investment scam whereby a group of fraudulent investors inflate the price of a security and then sell it at a profit. In a daisy chain scenario, an investor or group of investors holding a long position in a low-price, small-cap stock unfoundedly publicize the stock as a promising opportunity. Read more

Dalal Street

Dalal Street is slang for the Bombay Stock Exchange. India's Bombay Stock Exchange is located on Dalal Street, as are many financial institutions. Read more

Dangerous Asset

A dangerous asset is an asset (usually a physical asset rather than a security) that carries a high degree of liability for its owner. For example, let's say John Doe has a 10-foot-deep pool in his back yard, which is in a neighborhood full of kids. Read more

Dark Pool

A dark pool is trading activity that occurs directly between parties without the use of an exchange, thereby keeping the transactions private. Institutions usually create dark pools. Read more

Dark Pool Liquidity

Dark pool liquidity refers to the amount of trading activity that occurs directly between parties without the use of an exchange, thereby keeping the transaction private. Dark pool liquidity usually is created by institutions. Read more

Darvas Box Theory

Named after famous ballroom dancer Nicolas Darvas, the Darvas box theory is a trading technique based on 52-week highs and volumes. To implement a Darvas box technique, an investor simply looks at stocks with heavy trading volume and then buys those stocks when they rise above their 52-week highs. Read more

Dash to Trash

A dash to trash occurs when investors bid up the price of a security to a point well above the security's reasonable value. For example, let's assume that Company XYZ is a restaurant company that hasn't shown a profit in 10 years, has a weak management team and has little working capital. Read more

Data Mining

Data mining refers to the systematic software analysis of groups of data in order to uncover previously unknown patterns and relationships. So called because of the manner in which it explores information, data mining is carried out by software applications which employ a variety of statistical and artificial intelligence methods to uncover hidden patterns and relationships among sets of data. Read more

Data Smoothing

Data smoothing is a statistical technique that involves removing outliers from a data set in order to make a pattern more visible. For example, let's say that a university is analyzing its crime data over the past 10 years. Read more

Data Warehousing

Data warehousing is an electronic method of organizing information. A data warehouse essentially combines information from several sources into one comprehensive database. Read more

Date Certain

A date certain is a legal term identifying a date on which an action or process must occur or complete. For example, let's say that John Doe rents a house from Jane Smith. Read more

David Ricardo

David Ricardo was an English classical economist and one-time member of the country's Parliament who lived from 1772 to 1823. He is the author of The Principles of Political Economy and Taxation and other books. Read more

Dawn Raid

In the finance world, a dawn raid is the purchase of a large number of shares or securities as soon as the market opens, usually in a takeover effort. Let's say that Company XYZ owns 40% of Company ABC but wants to acquire a controlling interest in Company ABC. Read more

DAX Index

The DAX Index is the most commonly cited benchmark for measuring the returns posted by stocks on the Frankfurt Stock Exchange. Started in 1984, the DAX index is comprised of the 30 largest and most liquid issues traded on the exchange. Read more

Day Cycle

A day cycle is a period of time for sending ACH debits and credits for settlement.   The Automated Clearinghouse (ACH) network allows companies and consumers to send payments from one account to another. Read more

Day Order

A day order is an order to buy or sell a security by the end of the day. Let's assume that John Doe wants to buy Company XYZ shares, but he's going to Bermuda for two weeks tomorrow and doesn't want to deal with his broker while he's on vacation. Read more

Day Rate

A day rate is the daily cost of a good, service or operating a business. Let's say that John Doe is a consultant to media companies. Read more

Day Trader

Day trader is a term applied to a very active securities trader who holds securities for a short period of time. Day traders will often open and close a position within the same day. Read more

Day-Around Order

A day-around order is an order that replaces an order from another day. It is most common in the equities markets. Read more

Day-Count Convention

A day-count convention is a method of counting the days between coupon dates. Let's assume a $1,000 bond from Company XYZ has a 10% coupon, which means it pays out $100 a year. Read more

Daylight Overdraft

A daylight overdraft occurs when a bank transfers out more in a day than it has in its reserves. Let's say Bank XYZ has assets of $100 million. Read more

Days Payable Outstanding (DPO)

Days payable outstanding (DPO) is the ratio of payables to the daily average of cost of sales. The formula for DPO is: Days Payables Outstanding = Accounts Payable/(Cost of Sales/360) For example, let's assume Company XYZ is a department store. Read more

Days Sales of Inventory (DSI)

Days sales of inventory is a ratio of inventory to sales. The formula is: Days Sales of Inventory = (Inventory/Cost of Sales) x 365 For example, let's say that XYZ Company had $15 million cost of sales for the year and $50,000 in inventory today. Read more

Days Sales Outstanding (DSO)

Days sales outstanding (DSO) is the ratio of receivables to the daily average of credit sales. The formula for daily sales oustanding is:DSO = Receivables / (Net Annual Sales on Credit / 360)If a company does not sell on credit (that is, the customer must pay immediately), then total sales is used in the denominator. Read more

Days Working Capital

Days working capital is the ratio of working capital to sales. The formula is: Days Working Capital = (Average Working Capital x 365)/Annual Sales Working capital is money available to a company for day-to-day operations. Read more

De-Merger

A de-merger is the partial or full sale of an asset or business segment. Let's assume Company XYZ is the parent of a food company, a car company and a clothing company. Read more

Dead Cat Bounce

A dead cat bounce refers to a temporary recovery in a stock price or a temporary market rally after a significant downward trend. For example, let's assume the market has been falling over the last ten weeks but there is a broad market rally in week 11. Read more

Dead Presidents

In the finance world, dead presidents are slang for U. S. Read more

Deadweight Loss

When supply and demand are out of equilibrium, the market inefficiency created and the societal cost is known as deadweight loss. When used in economics, deadweight loss will be applied to the deficiency that has occurred due to the inefficient allocation of economic resources. Read more

Death Benefit

A death benefit is a payment to the beneficiary on an annuity, pension, or life insurance policy upon the death of the annuitant or policyholder. Also called a survivor benefit, a death benefit may come in the form of a one-time payment on a life insurance policy or in a series of income payments that are a percentage of those granted to the annuitant prior to death. Read more

Death Bond

A death bond is a bond backed by life insurance policies. Let's say Company XYZ is a life-settlement provider. Read more

Death Cross

A death cross is a technical indicator that occurs when a stock's short-term moving average falls below its long-term moving average. Market technicians believe moving averages define the trend and provide support or resistance. Read more

Death Put

A death put is an option added to a bond that gives the bondholder's estate the right, but not the obligation, to sell the bond back to the issuer at face value if the bondholder dies. Bob buys a bond with a death put for $1,000. Read more

Death Spiral

A death spiral is a kind of loan investors provide to a company in exchange for debt that can convert into stock, typically at below-market share prices. Let's say Company XYZ is running low on cash and needs $1 million in capital. Read more

Death Star IPO

A Death Star IPO is a wildly successful IPO. The term is a reference to the Star Wars movies, in which Darth Vader's Death Star battle station could pulverize other planets with a single laser beam. Read more

Death Tax

A death tax, also called an estate tax, is a tax assessed on all or a portion of an inherited estate. Life insurance, pensions, real estate, cars, belongings and debts are all part of one's estate. Read more

Debentures

Debentures are bonds that are not secured by specific property or collateral. Instead, they are backed by the full faith and credit of the issuer, and bondholders have a general claim on assets that are not pledged to other debt. Read more

Debit

A debit is an accounting record that represents either an increase in assets or a decrease in liabilities or net worth. A debit is the opposite of a credit. Read more

Debt

In the business world, debt is an amount borrowed. For example, let's assume Company XYZ has invented a new product that will revolutionize the widget market. Read more

Debt Discharge

A debt discharge is a legal action that relieves a borrower from his or her obligations to a lender.   Debt discharge typically happens during bankruptcy, which is a legal process under which a borrower protects and or liquidates assets in order to repay debts. Read more

Debt Financing

Debt financing is the use of borrowing to pay for things. For example, the basic idea behind acquisition debt financing is that the acquirer purchases the target with a loan collateralized by the target’s own assets. Read more

Debt Load

Debt load is the total amount of debt that a company has on its balance sheet. All publicly traded companies must file financial statements, including balance sheets, every quarter. Read more

Debt Ratio

A debt ratio is simply a company's total debt divided by its total assets.  Debt Ratio = Total Debt / Total AssetsFor example, if Company XYZ had $10 million of debt on its balance sheet and $15 million of assets, then Company XYZ's debt ratio is:Debt Ratio = $10,000,000 / $15,000,000 = 0. Read more

Debt Security

A debt security is an investment in a debt instrument issued by a corporation or government as it borrows money. Commonly, the security, also referred to as a bond or fixed income security, will be issued with a stated face value (amount borrowed), maturity date, and rate of interest. Read more

Debt Service

Debt service is the act of making interest and principal payments on debt. For example, let's say Company XYZ borrows $10,000,000 and the payments work out to $14,000 per month. Read more

Debt Service Coverage Ratio

A company's debt service coverage ratio (DSCR) refers to its ability to meet periodic obligations on outstanding liabilities with respect to its net operating revenue. The debt service coverage ratio (DSCR) measures how effectively a company's operations-generated income is able to cover outstanding debt payments. Read more

Debt-to-Equity Ratio (D/E)

The debt-to-equity ratio (D/E) is an essential formula in corporate finance. It’s used to measure leverage (or the amount of debt a company has) compared to its shareholder equity. Read more

Debtor

A debtor is a person or entity legally required to provide a payment, service or other benefit to another person or entity (the obligee). Debtors are often also called "borrowers" or "obligors" in contracts. Read more

Debtor in Possession (DIP)

Debtor in possession (DIP) refers to the status of a business that retains control of its assets and continues to operate while under the Chapter 11 bankruptcy reorganization process.  Under Chapter 11 bankruptcy, a business files for protection from creditors while it reorganizes itself. Read more

Debtor-in-Possession (DIP) Financing

Debtor-in-possession (DIP) financing refers to financing for a business that retains control of its assets and continues to operate while under the Chapter 11 bankruptcy reorganization process.  Under Chapter 11 bankruptcy, a business files for protection from creditors while it reorganizes itself. Read more

Decedent

In legal terms, a decedent is a dead person.   Let's say John Doe dies this year. Read more

Declaration Date

In the income investing world, a declaration date is the date on which a company announces an upcoming dividend payment, usually by issuing a press release a few weeks before the dividend is actually paid. Let's assume you own 100 shares of Company XYZ. Read more

Decoupling

Decoupling refers to instances in which security prices behave contrary to normally-occurring correlations. Movements in the price of different securities may be directly or indirectly correlated. Read more

Dedicated Portfolio

A dedicated portfolio is a passively managed portfolio whose cash flows are designed to match the cash flows needed to fulfill a future obligation. A dedicated portfolio is also referred to as a structured portfolio. Read more

Deductible

In the finance world, deductible is usually short for tax-deductible, which refers to an expense that reduces the amount of income that is subject to tax. In the insurance world, a deductible is a required payment from the insured to the insurer in order to trigger coverage. Read more

Deduction

A deduction is a reduction in taxable income, which thereby lowers the amount of taxes owed. Federal, state, and local tax codes determine what kinds of items or expenses are deductible and which taxpayers are eligible for deductions. Read more

Deed

A deed is an ownership document that entitles its holder to specific rights to a property based on a set of explicit conditions. In most cases, a deed establishes proper ownership of a piece of property such as a home or automobile. Read more

Deed of Trust

A deed of trust, most commonly used in real estate transactions, is an agreement between a borrower and a lender that the title to the property purchased by the loan will be held in trust by a neutral third party, a trustee, until the loan is paid in full. Once executed, the document is filed as a public record. Read more

Deep Discount Bond

A deep discount bond is a bond that sells at a price which is 20% or more below the face value of the bond, and carries a low rate of interest during the term of the bond.   The investor purchases the bond at a price that is below face value. Read more

Default

A default is a violation of a promise to pay debt in agreed amounts at agreed times. Let's assume Company XYZ has a line of credit for $10 million from Bank ABC, and $5 million of that line is outstanding. Read more

Default Risk

Default risk is the chance that the bond issuer will not make the required coupon payments or principal repayment to its bondholders. Although the definition of default risk may be fairly concrete, measurement of it is not. Read more

Defensive Company

A defensive company is a company that does well or at least remains stable during economic contractions and expansions. Defensive companies are most famous for their ability to weather economic dips, but it is important to note that they also tend to ignore economic upswings. Read more

Defensive Stock

A defensive stock is a stock that is either stable or a market outperformer during an economic contraction. Defensive stocks are usually found in industries that produce necessary and often relatively cheap products that consumers cannot go without. Read more

Deferred Annuity

A deferred annuity is a type of annuity that delays monthly or lump-sum payments until an investor-specified date. The interest usually grows tax-deferred before it is withdrawn. Read more

Deferred Income Tax

Deferred income tax refers to a portion of income earned by a company during a given year for which the associated income tax has not yet been paid. Certain accounting practices and tax laws often result in a portion of a company’s income being realized and accounted for in one accounting period, but not taxable until another. Read more

Deferred Interest Bond

A deferred interest bond is a bond which pays interest in full upon maturity. A deferred interest bond, unlike most bonds, does not pay interim (coupon) payments between issuance and maturity. Read more

Deferred Payment Option

A deferred payment option is an option contract for which the payment is deferred until, and paid not sooner than, the contract’s expiration date. A deferred payment option operates no differently from a standard vanilla option contract with the exception that payment, should the holder choose to exercise the option, will not be received until the expiration date. Read more

Deferred Revenue

Deferred revenue refers to payments received in advance for services which have not yet been performed or goods which have not yet been delivered. These revenues are classified on the company's balance sheet as a liability and not as an asset. Read more

Deferred Stock Purchase Plan

A deferred stock purchase plan is an uncapped stock contribution with an employer matching the contribution that vests as the employee provides additional service during a deferral period.  In a deferred stock purchase plan, employees purchase company restricted stock on a pre-tax basis using income that would otherwise be paid as taxable salary or a bonus. Read more

Deferred Tax Liability (DTL)

Deferred tax liability (DTL) is a balance sheet line item that accounts for the temporary difference between taxes that will come due in the future and taxes paid today.   Because of accrual accounting rules, a company may be able to defer taxes on some of its income. Read more

Deficit

A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets. A deficit is the opposite of a surplus. Read more

Deficit Spending

Deficit spending is spending that reduces or offsets a surplus. In the business world, the term often refers to situations where expenses exceed revenues, imports exceed exports, or liabilities exceed assets. Read more

Defined Benefit Plan

A defined benefit plan is a qualified retirement account that contractually agrees to pay a specified benefit at the plan holder's age of retirement. This type of qualified plan clearly defines the amount of retirement income to be paid to the account owner. Read more

Defined Contribution Plan

In general, a defined contribution plan is a tax-deferred savings plan that people fund with their own money (rather than an employer) and use to save for retirement. It is the opposite of a defined benefit plan, which is typically a pension plan funded by the employer or an entity other than the person who will directly benefit from the plan. Read more

Deflation

Deflation describes the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money. It is the opposite of inflation, but is not the same as disinflation (which is the slowing of inflation). Read more

Dehedge

In finance, to dehedge is to engage in an investing strategy that does not protect an investment or portfolio against loss. It usually involves securities that move in the same direction. Read more

Delinquent

Delinquent means “something or someone who fails to accomplish that which is required by law, duty, or contractual agreement, such as the failure to make a required payment or perform a particular action. ”   In financing and investing, delinquency occurs when a person or business with an obligation to make payments against a debt, such as loan payments, does not make those payments on time or in a regular, appropriate manner. Read more

Delisting

Delisting refers to the removal of a security from active trading. It generally occurs when a company goes private, is bought out, declares bankruptcy or fails to meet listing requirements. Read more

Delivery Option

A delivery option is incorporated into an interest rate future contract and allows the writer to specify the time and place of delivery as well as the asset to be delivered. An interest rate future contract contains an underlying short position supplied by the writing counterparty. Read more

Delta

Delta is the ratio comparing the change in price of an underlying asset to the change in price of a derivative. It is one of the four main statistics, known as "Greeks," used to analyze derivatives. Read more

Demand Deposit

A demand deposit is an account with a bank or other financial institution that allows the depositor to withdraw his or her funds from the account without warning or with less than seven days' notice. Demand deposits are a key component of the M1 money supply calculated by the Federal Reserve. Read more

Demand Elasticity

Demand elasticity is a measure of how sensitive the demand for a product or service is to changes in the price of that product or service. The formula for demand elasticity is: Elasticity = % Change in Quantity/% Change in Price Let's assume that when gas prices increase by 50%, gas purchases fall by 25%. Read more

Demand Loan

A demand loan is a loan where the lender may require the borrower (a brokerage house) to repay at any time. These loans may also be called a broker loan or call loan, A demand loan is granted to a brokerage house needing short-term capital for financing the margin portfolios of clients. Read more

Demonetization

Demonetization is the act of removing a currency from use as legal tender. Demonetization occurs when a governing body cancels the legal tender status of a currency unit in circulation. Read more

Denomination

Usually associated with currency, a denomination is the value specified on a monetary instrument. Denomination values are graduated and usually divisible by some common denominator (hence, 'denomination'). Read more

Dependent

A dependent relies on someone else for most or all of his or her financial support.   In general, dependents are exemptions that reduce a taxpayer's taxable income. Read more

Depletion Allowance

A depletion allowance is a tax deduction allowed in order to compensate for the depletion or "using up" of natural resource deposits such as oil, natural gas, iron, timber etc.   The allowance is a form of cost recovery for capital investment which, unlike income, is not taxable. Read more

Deposit

In the finance world, a deposit is the placement of funds in an account with a bank or other financial institution. Many people also use the term to refer to a refundable down payment made to ensure that a future transaction occurs. Read more

Deposit Interest Rate

The deposit interest rate is the rate of interest earned on a deposit account held by a depositor at a bank or savings institution. Common types of deposit accounts include savings accounts, interest-bearing checking accounts, and certificates of deposit. Read more

Depository Trust & Clearing Corporation (DTCC)

The Depository Trust & Clearing Corporation (DTCC) is a subsidiary of the National Securities Clearing Corporation (NSCC). The DTCC, established in 1973, settles transactions between buyers and sellers of securities. Read more

Depreciated Cost

Depreciated cost is the cost of an asset minus its accumulated depreciation. Another term for this concept is net book value. Read more

Depreciation

Depreciation is an accounting method that measures the reduction in an asset’s value over the course of its useful life. It also represents how much of an asset’s value is depleted due to usage, wear and tear, or obsolescence. Read more

Depression

A depression is a sustained downturn in economic activity characterized by high unemployment, decreased output and reduced levels of trade.  Low levels of consumer confidence during times of depression generally result in a severe drop in consumer demand and spending. Read more

Deregulation

Deregulation occurs when there is a significant decrease or elimination of government regulation over an industry, market, or economy. The transportation industry is one of the most famous industries to feel the effects of deregulation. Read more

Derivative

A derivative is a financial contract with a value that is derived from an underlying asset. Derivatives have no direct value in and of themselves -- their value is based on the expected future price movements of their underlying asset. Read more

Descending Triangle

The descending triangle is a pattern observed in technical analysis. It is the bearish counterpart of the bullish ascending triangle pattern. Read more

Detachable Warrant

A detachable warrant is a warrant that can be sold separately from the security to which it was originally attached. Warrants are securities that give the holder the right, but not the obligation, to buy a certain number of securities (usually the issuer's common stock) at a certain price before a certain time. Read more

Devaluation

Devaluation refers to a decrease in a currency's value with respect to other currencies. A currency is considered devalued when it loses value relative to other currencies in the foreign exchange market. Read more

Diluted Earnings per Share

Diluted earnings per share is a measure of profit. The formula for diluted earnings per share is: Fully Diluted Earnings Per Share = (Net Income - Preferred Stock Dividends) / (Common Shares Outstanding + Unexercised Employee Stock Options + Convertible Preferred Shares + Convertible Debt + Warrants) Let's assume Company XYZ had $10,000,000 of net income this year. Read more

Dilution

Dilution is a reduction in proportional ownership caused when a company issues additional shares. Let's assume you own 100,000 shares of XYZ Company. Read more

Direct Access Trading (DAT)

Direct access trading (DAT) refers to any computerized trading system which connects traders to markets, thereby eliminating the need for a broker. Direct access trading (DAT) encompasses a variety of electronic trading tools and platforms which connect traders with other traders and with the actual markets (e. Read more

Direct Cost

A direct cost is any cost related to the production method of a good or service. It is the opposite of an indirect cost. Read more

Direct Deposit

Direct deposit refers to the electronic transfer of a cash payment into the recipient's bank account. Direct deposit is a method of payment where a paying party, such as an employer or government agency, electronically transfers a payment in cash from its bank account into the bank account of the payee. Read more

Direct Tax

A direct tax is any tax levied on companies or individuals that cannot be transferred to another party. It is the opposite of indirect tax. Read more

Disclosure Statement

A disclosure statement is an official document that outlines the terms, conditions, risks and rules of a financial transaction, such as a loan or an investment. In the case of a loan, the disclosure statement describes the terms of the loan, such as the interest rate, the amount borrowed, the repayment schedule, fees, disbursement conditions, collateral requirements, insurance requirements, prepayment rights (or penalties), and any other expectations of the lender and any additional obligations of the borrower. Read more

Discount Broker

A discount broker is a stockbroker who charges a reduced commission to buy and sell shares for clients. Discount brokers are one of two general categories of brokers, the other being full-service brokers. Read more

Discount Rate

The discount rate, also known as the Fed discount rate, is the interest rate charged to commercial banks and other institutions on loans from a Federal Reserve bank. This process is a key tool of Federal Reserve monetary policy and an integral part of the Federal Reserve’s role in the broader financial system. Read more

Discount to Net Asset Value (NAV)

Discount to net asset value (NAV) refers to a situation where shares of a closed-end stock fund are trading at a price lower than the fund’s net asset value per share. For example, a fund could be described as "trading 5% discount to NAV. Read more

Discount Window

The discount window is the method that banks use to borrow money from a central bank on a short-term basis, named after an actual teller window at the Federal Reserve where such transactions used to be carried out. The discount window is used only in financial emergencies, such as major stock market collapses or liquidity crises. Read more

Discounted Cash Flow (DCF) Analysis

Discounted cash flow (DCF) analysis is the process of calculating the present value of an investment's future cash flows in order to arrive at a current fair value estimate for the investment. The formula for discounted cash flow analysis is: DCF = CF1/(1+r)1 + CF2/(1+r)2 + CF3/(1+r)3. Read more

Discretionary Income

Discretionary income is the income left over after paying taxes and normal living expenses. Discretionary income is the income remaining after the essentials (taxes, food, clothing, shelter, etc. Read more

Diseconomies of Scale

Diseconomies of scale lead the marginal cost of a product to increase as a company grows. This is the opposite of economies of scale which cause the marginal cost for a product to decrease as a result of efficiencies achieved as a company grows and can spread its fixed costs over a larger quantity of products/services offered. Read more

Disposable Income

Disposable income, also known as net pay, refers to the income that’s left for personal spending after direct taxes, such as federal and state income taxes, have been accounted for. It is a key concept in personal budgeting and economic policy. Read more

Disposition

Disposition refers to disposing of an asset through sale, assignment, or other transfer method.  When an investor sells stock or bonds in a particular company, the sale is referred to as a disposition of the stock or bonds. Read more

Distressed Sale

A distressed sale occurs when a sale must be made under unfavorable conditions for the seller.   In a distressed sale, the seller is affected by unfavorable conditions that force the sale. Read more

Distressed Securities

Distressed securities are financial instruments of a company that are under price pressure due to bankruptcy (Chapter 7), reorganization (Chapter 11), financial turmoil, or other economic trauma. Distressed securities can take the form of stocks, bonds, debt, or other financial instruments. Read more

Diversification

Diversification is a method of portfolio management whereby an investor reduces the volatility (and thus risk) of his or her portfolio by holding a variety of different investments that have low correlations with each other. The basic idea behind diversification is that the good performance of some investments balances or outweighs the negative performance of other investments. Read more

Diversified Common Stock Fund

A diversified common stock fund is a type of mutual fund that invests exclusively in shares of common stock. Diversified common stock funds may comprise any combination of common stocks. Read more

Divestiture

A divestiture or divestment is the reduction of an asset or business through sale, liquidation, exchange, closure, or any other means for financial or ethical reasons. It is the opposite of investment. Read more

Dividend

Dividends are payments from corporate earnings to company shareholders. Dividends are one way for you to receive a return from owned shares. Read more

Dividend Achievers

The term "dividend achievers" is used to describe an elite group of companies that have improved their annual regular dividends for at least 10 consecutive years and meet certain liquidity requirements.   Additional eligibility requirements for dividend achievers include: 1) being listed in the NYSE or Nasdaq and 2) having a minimum average daily cash volume of $500,000 per day for the months of November and December prior to the Index's reconstitution date. Read more

Dividend Aristocrats

The term "dividend aristocrats" is used to describe Standard & Poor's (S&P) 500® Index companies that have consistently improved their dividend rates every year for at least 25 consecutive years. Typically, a dividend aristocrat is a large and relatively stable blue-chip company with a healthy balance sheet. Read more

Dividend Capture Strategy

The dividend capture strategy is the act of purchasing a security for its dividend, capturing the dividend, and then selling the security to buy another about to pay a dividend. By doing this, investors can receive a steady stream of dividend income instead of waiting for an individual holding to pay its regular dividend. Read more

Dividend Declaration Date

A dividend declaration date is the date on which a company announces an upcoming dividend payment, usually by issuing a press release a few weeks before the dividend is actually paid. Let's assume you own 100 shares of Company XYZ. Read more

Dividend Discount Model (DDM)

The dividend discount model (DDM) is a method for assessing the present value of a stock based on the growth rate of dividends. The dividend discount model (DDM) seeks to estimate the current value of a given stock on the basis of the spread between projected dividend growth and the associated discount rate. Read more

Dividend ETF

A dividend ETF is a basket of dividend-paying securities that are bundled together into a single security that can be bought and sold like a stock. A dividend ETF usually mimics part or all of a dividend stock index. Read more

Dividend Fund

A dividend fund is a type of mutual fund which invests exclusively in equity shares which pay regular dividends. A dividend fund seeks to provide investors with income from common and preferred shares of stock which yield dividends in cash and stock (in some cases) on a regularly-occurring basis. Read more

Dividend Payable Date

The dividend payable date is the date on which a company pays a dividend to its shareholders of record. Let's assume you own 100 shares of Company XYZ. Read more

Dividend Payout Ratio

The dividend payout ratio measures the percentage of a company's net income that is given to shareholders in the form of dividends. The dividend payout ratio is a relatively simple calculation: Total Annual Dividends Per Share / Diluted Earnings Per Share For example, let's assume that Company XYZ distributed four regular quarterly dividend payments of $0. Read more

Dividend Record Date

A dividend record date is the date on which the company finalizes the list of investors who qualify as "shareholders of record. " Investors listed as shareholders of record will receive the firm's dividend payment. Read more

Dividend Reinvestment Plan (DRIP)

A dividend reinvestment plan (DRIP) is an arrangement offered by companies to investors wishing to receive additional shares of company stock in lieu of cash dividend payments. In many cases, optimistic investors prefer to gain additional equity in a company rather than receive the cash dividends related to their holdings. Read more

Dividend Tax Credit

The dividend tax credit generally refers to a Canadian tax program whereby Canadian residents receive a reduction in taxes owed on dividends received from Canadian corporations. In Canada, dividends are considered taxable income to investors. Read more

Dividend Yield

Dividend yield is the annual dividend payment shareholders receive from a particular stock shown as a percentage of the stock's price. (Dividends are corporate earnings distributed to company shareholders typically through the two forms of cash or stock. Read more

Dividend-Capture Strategy

The dividend-capture strategy is the act of purchasing a stock before it goes ex-dividend, capturing the dividend and then selling the stock and buying another stock that is about to go ex-dividend. For example, let's assume you purchase 100 shares of Company XYZ before it declares its next dividend. Read more

Dogs of the Dow

"Dogs of the Dow" is a stock-picking strategy whereby an investor buys equal amounts of the 10 highest-yielding stocks within the Dow Jones Industrial Average at the beginning of each year. After every year, the investor updates their holdings to reflect the current highest-yielding stocks in the Dow. Read more

Doji Candlestick

A doji candlestick is a significant signal in the technical analysis of financially traded assets.  If prices finish very close to the same level (so that no body or a very small real body is visible), then that candle can also be read as a doji. Read more

Dollar-Cost Averaging

Investment advisors frequently suggest dollar-cost averaging in their articles and publications, but what does it mean? Why do many advisors believe it is the best strategy? Dollar-cost average is an investment strategy where an individual invests a fixed amount at regular intervals into the same stocks, mutual funds, or ETFs (exchange-traded funds). No matter what the financial markets are doing, the dollar amount never varies. Read more

Donut Hole

The donut hole is a situation that occurs as part of Medicare’s Part D prescription coverage.   Let’s assume that John Doe is enrolled in Medicare. Read more

Double Bottom

The double bottom -- one of the many charting patterns used in technical analysis -- is characterized by a fall in price, followed by a rebound, followed by another drop to a level roughly similar to the original drop, and finally another rebound. The double bottom charting pattern is among the most commonly occurring charting patterns, and closely resembles the letter "W". Read more

Double Taxation

Double taxation occurs when a tax is imposed more than once on the same asset, income stream, or transaction. The most well-known example of double taxation in the U. Read more

Double-Dip Recession

A double-dip recession occurs when the economy experiences a recession followed by a brief recovery and then another period of recession. Recessions occur when the gross domestic product (GDP) declines for two consecutive quarters. Read more

Dow 30

The Dow 30 is slang for the Dow Jones Industrial Average. The Dow 30 is probably the best-known and most widely followed index in the world. Read more

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA), sometimes referred to as simply the Dow, is one of several well-known stock market indices. The DJIA was created by Charles Dow, founder of the Wall Street Journal, to measure the daily stock price movements of 30 large, publicly-owned U. Read more

Dow Jones Transportation Average (DJTA)

The Dow Jones Transportation Average (DJTA) is the most widely recognized gauge of the transportation sector. It is also the oldest index used today, even older than its more famous brother, the Dow Jones Industrial Average (DJIA). Read more

Dow Jones Utilities Average (DJUA)

The Dow Jones Utilities Average (DJUA) is the most widely cited utilities index in the United States and the most widely recognized gauge of the utilities sector. The Dow Jones Utilities Average is comprised of fifteen of the largest utilities companies in the U. Read more

Dow Theory

Dow Theory is an analysis that explores the relationship between the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA). When one of these averages climbs to an intermediate high, then the other is expected to follow suit within a reasonable amount of time. Read more

Down Payment

A down payment is the initial payment a borrower puts toward a large purchase, and is usually a specified percentage of the total purchase price. Down payments are typically used for real estate, cars and other big-ticket items that are not usually paid in full at the time of purchase; the remainder of the purchase amount is paid back over time through a loan. Read more

Downgrade

A downgrade is an announcement of an analyst lowering their opinion on the desirability of a company as an investment. It can apply to either debt or equity. Read more

Downside

Downside refers to an investment's potential loss in value. Let's pretend you purchase 100 shares of Company XYZ at $5 per share, for a total investment of $500. Read more

Downside Risk

Downside risk is the probability that an asset will fall in price. It is also the measure of the possible loss from that decline. Read more

Downsize

Downsizing is a strategy used to reduce the size and scope of a business in order to improve its financial performance, usually by laying off employees or closing less-profitable divisions. Downsizing often takes place as part of a larger restructuring program at a company. Read more

Downstream

Downstream refers to the benefits (or costs) that will ultimately result from decisions made today. In finance, a series of investments might be made with the anticipation that at a point in time in the future these efforts will yield a series of returns. Read more

Downtick

A downtick occurs when a security sells at a price less than the preceding sale. A downtick is the opposite of an uptick. Read more

Dragonfly Doji

A dragonfly doji is the most uncommon candle of the four different types of doji candlesticks. As with any doji, the dragonfly depicts a situation in which supply and demand are in equilibrium, thus possibly signaling an important reversal. Read more

Dry Trust

Also called a naked trust or a passive trust, with a dry trust, a person transfers assets into a trust in order to pass them on to heirs or beneficiaries. Let's say John Doe is in a shaky marriage and wants to make sure $1 million of his money goes to his children rather than his second wife, whom he may divorce. Read more

Dual Listing

Dual listing (also known as "cross-listing") is the listing of any security on two or more different exchanges. Let's assume Company XYZ is a Canadian public company that lists its shares on the Toronto Stock Exchange. Read more

Dual-Class Ownership

Dual-class ownership is a type of stock structure in which a company issues different classes of stock, each with different privileges. Let's say Company XYZ issues Class A and Class B shares. Read more

Dual-Class Stock

A company has dual-class stock if it has more than one type of stock and the different classes have varying voting rights, dividend payments, or other characteristics. Companies can have several classes of shares. Read more

Due Diligence

Due diligence is the careful, thorough evaluation of a potential investment, whether on a corporate or individual level. For individual investors, due diligence often means studying annual reports, SEC filings, and any other relevant information about a company and its securities. Read more

Dun and Bradstreet (D&B)

Dun & Bradstreet provides information about businesses through a global commercial database.   Founded more than 170 years ago, the company (NYSE: DNB) maintains a global database of information about more than 200 million businesses. Read more

DUNS Number

A DUNS number (DUNS stands for Data Universal Numbering System) identifies a company.   Let's say Brad Smith of Tampa, Florida, owns a business called Brad's Bagels. Read more

Duopoly

A duopoly is a form of oligopoly occurring when two companies (or countries) control all or most of the market for a product or service. There are two kinds of duopolies. Read more

DuPont Analysis

DuPont analysis examines the return on equity (ROE) analyzing profit margin, total asset turnover, and financial leverage. It was created by the DuPont Corporation in the 1920s. Read more

DuPont Identity

The DuPont identity breaks down return on equity (ROE) into its components -- profit margin, total asset turnover, and financial leverage -- so that each one can be examined in depth. The DuPont identity is also referred to as DuPont analysis. Read more

Durable Goods

Durable goods are a category of tangible (physical) products that last three years or longer. Typically, these goods are a bit more expensive because they tend to last for long periods of time. Read more

Durables

Durables are a category of consumer products that do not have to be purchased frequently because they are made to last a long time (typically more than three years). They are also called durable goods or consumer durables. Read more

Duration

A bond’s duration is a measure of the bond’s sensitivity to interest rate changes. Duration may also be thought of as a measurement of interest rate risk. Read more

Duress

Duress is pressure that one person or entity puts on another person to do something that he or she would normally not do. Let's say Artie owns a restaurant called Vesuvio. Read more

Dutch Auction

A Dutch auction is a method for pricing shares (often in an initial public offering) whereby the price of the shares offered is lowered until there are enough bids to sell all shares. All the shares are then sold at that price. Read more

Duty

In the tax and import/export world, a duty (or customs duty) is money collected under a tariff.   A duty is a federal tax on imports or exports. Read more

Dwarf

In the mortgage business, a dwarf is a group of mortgage-backed securities that mature in fewer than 15 years. The Federal National Mortgage Association (FNMA or Fannie Mae) issues dwarves. Read more

Dynamic Asset Allocation

Dynamic asset allocation is an investment strategy whereby an investor makes long-term investments in certain asset classes or securities and periodically buys and sells those securities in order to keep the allocations in their original proportions. Let’s assume you have $100,000 to invest. Read more