Glossary of Terms

The information presented here is not intended as financial, investment, tax or legal advice and is provided for educational purposes only.
An exchange-traded fund based on the Dow Jones Industrial Average.
Day High
The high price of the last trading day.
Day Low
The low price of the last trading day.
Debt-Equity Ratio
One measure of a company's financial health. The ratio is calculated by dividing a company's total liabilities by total shareholder equity. This ratio gives an indication of how much equity would be available to pay off creditors if the company were liquidated. A debt-equity ratio of 3:1, for example, indicates that the company's debt is three times the value of shareholder equity.
Debt/Total Capital
This ratio indicates how much financial leverage a company has. It is calculated by dividing total debt by total-invested capital. Total debt is long- and short-term debt obligations, including bonds, notes payable, mortgages, lease obligations, and industrial revenue bonds. Total invested capital is the sum of common and preferred stock equity, long term debt, deferred income taxes, investment credits, and minority interest.
Declaration Date
The date the Board of Directors of closed-end funds, exchange-traded funds, and preferred shares announce the amount of the dividend and/or capital gains distribution to be paid to shareholders.
Defined Benefit Pension Plan
A retirement plan that promises to pay a predetermined amount to employees who retire after a specified number of years of employment. Some defined benefit plans permit employee contributions while others are funded exclusively by employer contributions. In a defined benefit plan, separate accounts are not established for each employee.
Defined Contribution Plan
A retirement plan in which the employee and/or employer contribute specified amounts periodically. Upon retirement, benefits will vary based on the amount of assets each employee accumulated and the performance of the investments in which the employee invested his assets. Accounts may be controlled by a firm-appointed trustee or self directed by each employee. Examples include 401(k)s, money purchase plans and profit sharing plans.
Defined Portfolio
A portfolio of securities that remains fixed, except under certain circumstances, for the life of the trust. Shares of this portfolio are offered to individual investors and called "units." Also called unit investment trust.
A general decline in the prices of goods and services, often caused by reduced money supply and/or a decrease in government, corporate and consumer spending and investing. Deflation can be especially dangerous because businesses earn less for each item sold, and consumers earn less money for the same work. With consumers and businesses earning less than anticipated, they find it increasingly difficult to repay existing debts — and an increasing percentage of income is used for debt repayment, businesses have less to invest and consumers have less to spend. This decreased demand can put further pressure on prices and demand, creating a deflationary spiral.
A company's efforts to pay off its debts. Corporations borrow significant sums to operate and grow. But if a corporation doesn't grow, it must delever — or get out of debt — by paying off loans. This is a signal that the corporation is not growing.
Department of Labor (DOL)
The United States Department of Labor is the agency charged with administering and enforcing the provisions of ERISA, including supervising pension plans established under ERISA as well as the parties involved in the establishment, management, or administration of any such plan.
The using up of an asset. Items which can be physically reduced, like the output of coal mines, are accounted for using depletion rather than depreciation.
Depository Trust Corporation (DTC)
A corporation owned collectively by broker-dealers and banks responsible for holding securities owned by its shareholders and their clients and for arranging the receipt, delivery, and monetary settlement of securities transactions. Once securities are on deposit, further transfers within the system can be accomplished electronically at low cost. DTC has merged with the National Securities Clearing Corporation (NSCC) to form the Depository Trust and Clearing Corporation (DTCC). DTC still exists as an operating unit of DTCC.
A decline in the value of an asset, such as an automobile. Businesses may see their physical assets (manufacturing plants, computer equipment, etc.) depreciate due to age, physical damage or obsolescence, among other factors.
A financial security or arrangement whose value is based on, or "derived" from, a traditional security, asset, or market index.
Designated Roth Contribution
An elective deferral contribution of after-tax income to a 401(k) or 403(b) plan. The contributions are accounted for separately from other pre-tax or employer contributions in the plan. Contributions and earnings grow tax deferred until withdrawn. Taxability on the earnings depends on the holding period and age of the participant.
Developed Nations
These are countries that have mature economies. General characteristics include major industrial production and high political stability.
Developing Nations (or Developing Markets)
Typically, these are countries that are in the early stages of economic development. General characteristics include a high demand for capital investment, a high dependence on export markets, a need to develop basic economic infrastructures and low political stability.
Direct Rollover
A distribution of eligible assets from an IRA, qualified plan, 403(b) plan, or a governmental 457 plan that is remitted directly to the receiving trustee, custodian or issuer of an eligible retirement plan and is reported to the IRS as a direct rollover. By taking a direct rollover rather than a conventional rollover, a participant in a qualified plan or 403(b) plan can avoid the mandatory 20% withholding required for distributions from those plans.
Disclosure Statement
A document which described the terms of an IRA. All investors who open an IRA account receive a copy of the current disclosure statement.
1. The difference between a bond's current market price and its face value or redemption value, if its current market price is less than its face value. 2. A type of debt security, such as Treasury bills and zero coupon bonds, which are issued at less than face value but are redeemed, at maturity, at face value.
Discount Rate
The interest rate the U.S. Federal Reserve charges member banks for loans. It is one of several tools the Fed employs to help set short-term interest rates.
Discounted Cash Flow
A method used to estimate the present value of future earnings or cash flows.
Distribution Schedule
The schedule describing when throughout the year when a closed-end fund, exchange-traded fund or preferred share makes income, principal, dividend and/or capital gains distributions.
The receipt of underlying stocks at redemption or termination of ownership in a fund, instead of receiving cash.
An individual or corporation serving as principal underwriter of a mutual fund's shares — buying shares directly from the fund and reselling them to investors.
The use of a variety of investments (or investment managers) in order to reduce risk exposure. See Asset Allocation.
Dividend Drag
A disadvantage of the dividend structure of unit trust exchange-traded funds (ETFs) that results from SEC rules that stipulate that passively managed ETFs cannot reinvest dividends back into the portfolio. ETFs must instead accumulate the dividends in cash and pay them to holders at periodic intervals. During periods of rising markets, the dividends would be better served being reinvested in securities rather than held in cash. This leads the ETF to lag a portfolio that would be able to reinvest.
Dividend Payout Ratio
The percentage of a company's earnings that it pays to shareholders in the form of dividends. Generally, mature, established and profitable companies may have higher ratios while smaller start-up companies in fast growing industries may choose to reinvest all earnings rather than pay dividends to shareholders.
Dividend Rate
The most recent rate at which a fund is distributing dividend and interest income earned on the fund's investment portfolio, expressed in cents per share.
Dividend Yield
The annual rate of return on a common or preferred stock.
A distribution of earnings from a fund to its shareholders paid in the form of cash or additional shares of the fund.
Dollar-Cost Averaging
An investment strategy of investing a fixed amount at regular intervals regardless of stock market movements. This may reduce average share costs to the investor, who acquires more shares when prices are low and fewer shares when prices are high. Dollar cost averaging cannot guarantee a profit or eliminate the risk of loss. Investors should consider their ability to continue investing regardless of fluctuating security prices.
Domestic Company
Refers to a corporation that is headquartered in the United States. Although many domestic corporations conduct a majority of their business and receive a majority of their revenues from operations in the United States, many of these same corporations have significant operations abroad and receive significant revenue from overseas.
Dow Jones Industrial Average (the Dow)
A widely followed price-weighted index of 30 of the largest, most widely held stocks traded on the New York Stock Exchange. Dow Jones & Co., a leading provider of global business news and information services, is a subsidiary of News Corporation.
Durable Power of Attorney
A legal document in which one person gives another person the authority to act on his behalf, should the need arise due to mental or physical incapacitation. The person granted power of attorney can manage the other person's day-to-day financial needs, for example, as well as handle more complex matters that may arise. See Non-Durable Power of Attorney.
The measure of a debt security's price sensitivity to interest rate changes, expressed in terms of years. Securities with longer durations usually are more sensitive to interest rate movements than those with shorter durations. Should interest rates change, the value of a fund that invests in securities with longer durations will fluctuate more than the value of a fund that invests in securities with shorter durations.
Dutch Auction
An auction system where the price of the item being auctioned is gradually reduced until it elicits a responsive bid. Dutch auctions are used to sell U.S. Treasury bills and to set rates on some re-marketed floating-rate debt instruments and preferred stocks.