Financial Dictionary




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Debenture

A long-term debt certificate that pays interest and is secured by the general credit of the issuer rather than a specific piece of property.

Deep Discount Bond

A longer term bond that has a low interest rate in relation to current rates. Consequently, the bond trades at a substantial discount to its par value.

Defensive Stock

A stock whose price stays stable or declines less in a falling market because demand for its product doesn't decline in a slowing economy. For example, the stocks of utilities and food companies are defensive because people still use electricity and buy food in down markets, but they may defer the purchase of a new car.

Deferred Annuity

An annuity contract that starts income payments at a future date.

Derivative

A financial instrument that has value and a return that is based on the results of an underlying stock, bond, or commodity.

Disclaimer

A written statement that attempts to reduce or eliminate a firm’s responsibility or liability for a particular act or item of information. For example, a disclaimer that certain information may not be accurate.

Discount

When an investment is selling for an amount that is less than face value or par.

Discounted Cash Flow

The amount of money an investor needs today to grow to a specified amount in the future, assuming a particular rate of return is earned for a given number of years.

Discount Rate

The interest rate that is charged by the Federal Reserve Bank for short-term loans to members and other banks.

Discretionary Account

A brokerage account that can be traded by a broker or advisor without the client's approval in advance.

Discretionary Income

The amount of income a person earns that is over and above the amount needed to pay for essential goods and services: lodging, food, utilities, etc. Discretionary income drives the purchase of certain products, for example, automobiles, and is used for investment.

Disinflation

An economic condition that is best described by slowing of general price increases. The condition occurs when the economy slows and supplies of goods and services exceed demand.

Disintermediation

In an economy, the movement of savings or investment funds away from institutions such as banks into higher-yielding investments in the securities markets, such as money market funds or bonds.

Diversification

Assets are diversified when they are invested in various asset classes, geographies, industries, and styles of management. Investors diversify assets to minimize the risk of large of losses.

Dividend Discount Model

A mathematical model that calculates a stock's future dividends to determine the current value of a company's share price.

Dividend Reinvestment Plan

Stockholders of some companies have the option of automatically reinvesting stock dividends in additional shares of the companies' stocks.

Dollar Cost Averaging

An investor buys a fixed dollar amount of stock at regular intervals so that more shares are bought at lower prices and fewer are bought at higher prices resulting in a lower overall average cost that is lower than the average price paid for the shares.

Double Dipping

When a financial advisor charges clients fees and commissions for his or her services. There is a high probability that this compensation is not disclosed to investors.

Dow Jones Industrial Average (DJIA)

The oldest and best known stock market index that measures the price changes of 30 large capitalization stocks.

Downside Risk

Sharp declines in prices of securities are a major risk for investors who buy stocks.

Due Diligence

An objective evaluation of an asset's financial characteristics, risk, and other statistics that impact future performance.

Durable Goods

A reference to industrial products that are used for relatively long time periods - usually more than three years.

Duration of a Bond

A measure that combines interest payments and the return of principle upon maturity to determine the amount of time it takes to receive an investor's principal back.