1. Definition A - C
2. Definition D - G
3. Definition H - L
4. Definition M - O
5. Definition P - R
6. Definition S - T
7. Definition U - Z
8. Back to Main
|Stock Glossary - (D - G)
A - C
| D -
G | H - L
| M -
O | P - R
| S -
T | U - Z
- Daily high
- The highest price reached by a stock (or index or commodity) during
a given day. See also: Daily low.
- Daily low
- The lowest price to which a stock (or index or commodity) dropped
during a given day. See also: Daily high.
- Date of record
- The date on which a company draws up the list of stockholders who
will receive a dividend.
- Day order
- A buy or sell order that, if unfilled, expires automatically at the
end of the day on which it was placed. Orders to your broker are day
orders unless otherwise specified. See Good-till-canceled order.
- Day trader
- Day traders are in and out of the market many times during the
course of one trading session and often do not hold a position in any
stocks overnight. This approach generates a lot of commissions and
portfolio turnover, and denies the day trader the ability to participate
in the long-term creation of wealth through compounded growth. It also
makes for a lot of time in front of a computer.
- Days sales outstanding (DSO)
- A measure of how long it takes a company to collect money that it is
due. The formula to calculate DSO for one quarter is: accounts
receivable / (sales / 90).
- Days to cover
- A measure of how many shares of a company have been sold short. It
is calculated by dividing the number of shares sold short by the average
daily trading volume. When you short a stock, you want the days to cover
to be low, around seven days or less. See Shorting Stocks.
- A debt obligation that is not backed by collateral.
- A liability that must be repaid.
- Debt-equity swap
- A transaction in which a corporation exchanges newly issued stock
(equity) for already existing bonds (debt).
- Debt-to-equity ratio
- Calculated by dividing long-term debt by shareholders' equity. A
measure of a company's leverage, this ratio shows the relationship
between long-term funds provided by creditors and funds provided by
shareholders. A high ratio may indicate high risk, and a low ratio may
indicate low risk.
- Decile rank
- A rating on a scale of 1 to 10; 1 is best, 10 is worst, and each
number corresponds to an increment of 10 percent.
- Declaration date
- The date on which a company's board of directors sets the amount of
the next quarterly dividend. Typically it is many weeks in advance of
the actual payout date.
- Deductible contribution
- A tax-deductible contribution to a retirement plan.
- Failure to make a payment, of either principal or interest, when
- Defined benefit plan
- A retirement plan that pays a specified amount to former employees,
typically based on the number of years of employment and on the average
salary in the years just before retirement. Commonly known as a pension,
a defined benefit plan was the predominant way that workers secured
their retirement funds prior to the widespread use of defined
- Defined contribution plan
- A retirement plan that is funded by contributions made by the
employer and the employee. The ultimate value of the plan will be based
on these contributions and on the return of the investments chosen by
the plan participant. Profit sharing plans, 401(k)s, 403(b)s, and 457s
are defined contribution plans.
- A decrease in the value of an asset, such as buildings or equipment.
- A financial contract whose value is "derived" from an another
security, such as stocks, bonds, commodities, or a market index such as
the S&P 500 or the Wilshire 5000. The most common types of
derivatives are options, futures, and mortgage-backed securities.
- Discount broker
- A brokerage that executes orders to buy and sell securities at
commission rates lower than a full-service brokerage. Discount brokers
are certainly favored by Fools. See the Discount Brokerage Center.
- Discount rate
- The interest rate that is charged by the Federal Reserve Board to
member banks for loans. See What Is
- Withdrawals from a retirement plan or IRA. Also, payments of
dividends and/or capital gains by a mutual fund, which can trigger
significant tax consequences for an investor. See Mutual
- Investing in separate asset classes (stocks, bonds, cash) and/or
stocks of different companies in an attempt to lower overall investment
- A share of a company's earnings paid to each stockholder. Typically,
dividends are paid on a quarterly basis and are determined by the
company's board of directors.
- Dividend reinvestment plan (Drip)
- The automatic investment of shareholder dividends into additional
shares of the company's stock. An excellent investment approach,
especially for those with smaller amounts to invest. See Investing Through
- Dividend yield
- The annual percentage rate of return paid in dividends on a share of
stock. To figure out the dividend yield (or just "yield"), divide the
annual dividend by the current share price of the stock.
- See Dow Jones
- Dogs of the Dow
- See Dow
- Dow Dividend Approach
- An investment strategy based on purchasing the highest-yielding
stocks in the Dow Jones Industrial Average. See The
Foolish Four and Other Dow Investing Strategies, Explained.
- Dollar cost averaging
- Investing equal amounts of money at regular intervals. The money
deducted from your paycheck if you participate in your company's 401(k)
program is an example of dollar cost averaging. Theoretically, you will
buy more shares when the price of your investment has declined, and
fewer shares when the price has risen. This may lead to an overall cost
basis that is lower than the average price per share.
- Dow Jones Industrial Average
- The oldest and most widely known index of the U.S. stock market, the
Dow represents the price movements of the 30 companies that, in the
opinion of the editors of The Wall Street Journal, most represent
the American economy.
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- Early withdrawal penalty
- A penalty imposed for withdrawing money from a fixed-term investment
before the term is complete. For example, cashing in a certificate of
deposit (CD) before its maturity triggers an early withdrawal penalty.
- The money that is left over after a company pays all its bills. Also
known as net income or net profit, earnings are reported on a quarterly
basis by all publicly traded companies.
- Earnings per share (EPS)
- A company's earnings, also known as net income or net profit,
divided by the number of shares outstanding.
- EBITDA (earnings before interest, taxes, depreciation, and
- Otherwise known as the middle line or operational cash flow, it is
not a replacement for earnings per share. Rather, it is a crucial
ingredient, along with the company's debt, in evaluating the company.
- Education IRA
- A savings account with significant tax advantages designed for use
in paying for a child's college education. See Efficient market theory
- A theory stating that stock prices perfectly reflect all market
information that is known by all investors. The theory also states that
no investor can beat the market's returns through skill because it is
impossible to determine future stock prices, and that luck explains why
some investors beat the market. The theory is much debated.
- Emerging markets fund
- A mutual fund that invests in countries with developing economies
such as those in Latin America and Asia (excluding Japan). Emerging
markets funds tend to be quite volatile due to political and economic
- Employee contribution
- An employee's deposit to a company retirement plan. Distinguished
from the company's contribution, such as a "company match" to a 401(k).
- Employee Stock Ownership Plan (ESOP)
- A retirement plan that invests in the employer's stock for the
benefit of employees.
- Employer matching contribution
- The amount that a company contributes to an employee's retirement
account, usually as a "match" of some percentage of the employee's
contribution. See Defined
- Shares of stock in a company. Because they represent a proportional
share in the business, they are "equitable claims" on the business
- Equivalent taxable yield
- The yield required from a taxable bond to give the same after-tax
yield as a tax-exempt bond.
- See Employee
Stock Ownership Plan.
- Estate planning
- More than just the writing of a will, estate planning is the
preparation of a plan to carry out an individual's wishes as to the
disposition of her property before or after her death. See Retiree
Portfolio Archives for discussions of such topics as revocable
living trusts, living wills, and designating IRA beneficiaries.
- Estate tax
- The tax imposed on assets inherited from an estate that exceeds the
federal tax unified credit. Estate taxes can take up as much as 55% or
more of an estate that has not been properly planned. See Retirement
Planning, Step 11: Keep It in
- Even lot
- A grouping of shares of stock divisible by 100 (e.g., 100, 200, 500,
- Ex-dividend date
- The date during the quarter by which you must own a stock to receive
its quarterly dividend payout. The term "ex" means out or without, as
all you Latin scholars know. So, on the ex-date, you buy the stock
without the dividend. Obviously, the company needs some time to get its
records straight; it cannot pay the dividend to someone who buys the
stock the morning the checks go out.
- Expense ratio
- The percentage of a mutual fund that is taken out of the pockets of
shareholders to pay expenses -- most of which go to the salesmen and
managers of the mutual fund. If you are investing in mutual funds, look
for funds with an expense ratio of less than one percent. See Mutual
Funds: Expense Ratios.
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- Face value
- See Par
- Fannie Mae
- See Federal
National Mortgage Association.
- Federal funds
- Federal Reserve deposits that banks and other financial institutions
"borrow" from one another to meet short-term cash needs. See What Is
the Federal Reserve?.
- Federal funds rate
- The interest rate that is charged by banks on overnight loans to
- Federal Home Loan Mortgage Corporation ("Freddie
- A publicly traded corporation that provides funds for mortgages, and
buys mortgages from banks and re-packages them as mortgage-backed
- Federal National Mortgage Association ("Fannie
- A government-sponsored private corporation authorized to purchase
and sell mortgages, which increases the affordability and availability
of mortgages. Also charged by the federal government with facilitating
the orderly operation of a secondary market for home mortgages.
- Federal Open Market Committee (FOMC)
- The 12-member policy-making arm of the Federal Reserve Board. It
sets key interest rates, such as the discount rate, and buys and sells
government securities, which increases or decreases the nation's money
- Federal Reserve
- The central bank of the United States. The Federal Reserve (or
"Fed") oversees money supply, interest rates, and credit. The Federal
Reserve System is governed by a seven-member board. There are 12
regional Federal Reserve Banks and 25 branches in the system. See What Is
- Fee-only compensation
- An arrangement in which a financial adviser charges by an hourly
rate, or by an agreed upon percentage of assets under management, rather
than on a commission basis.
- An individual, corporation, or association that is charged with
managing or investing another's assets.
- First in, first out, usually regarding the sale of stock. Unless
otherwise specified, the specific shares sold in an account will be the
first shares that were bought.
- Fiscal year
- A 12-month accounting period.
- Fiscal year-end
- The end of a 12-month accounting period.
- Fixed-income fund
- A mutual fund that invests in bonds, CDs, preferred stock, or other
- Foolish Four
- The Fool's variation on Dow dividend investing. The Foolish Four
strategy concentrates on large-cap stocks with high dividend yields. See
- 401(k)s, 403(b)s, and 457s
- Employer-sponsored retirement plans named after the respective
Internal Revenue Code sections in which they appear. Given their tax
advantages and the possibility of employer matching (read: FREE MONEY),
these plans are well worth considering. For-profit entities offer the
401(k) plan, nonprofits have the almost identical 403(b) plan, and local
and state governments offer the 457 plan. See Is Your 401(k)
- Freddie Mac
- See Federal
Home Loan Mortgage Corporation.
- Free cash flow
- The cash that's left over after everything -- bills from suppliers,
salaries, expenses for the annual holiday bash, new equipment to expand
the business -- is said and done. Theoretically, free cash flow is the
amount of cash a business could issue to shareholders in the form of a
dividend check. See Cash
- Front-end load
- A sales commission charged by a mutual fund, typically around 5%.
Truth About Mutual Funds: Loads.
- Full-service broker
- Full-service brokers earn commissions for each trade made in a
customer's account. They make more money by trading in and out of lots
of investments. They are sometimes referred to as "full-price brokers."
See Eyes on
- Fundamental analysis
- The method of evaluating a company by assessing its financial
statements, earnings, sales, and management. See Technical
- Futures/futures contracts
- A contract to buy or sell an amount of a commodity for a specific
price at a specific point in the future.
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- See Gross
- See Guaranteed
- Ginnie Mae
- See Government
National Mortgage Association.
- Global fund
- A mutual fund that invests anywhere in the world, including the U.S.
- See Gross
- "Going public"
- Performing an initial public offering. That is, offering shares of
your company to the public so that they may buy them.
- Good-till-canceled (GTC) order
- An order to buy or sell a security that remains operative until the
order is executed or canceled. This is an order that does not expire if
not exercised during the day it is made as with the case of a day order.
See Day order.
- Government National Mortgage Association ("Ginnie
- An agency within the U.S. Department of Housing and Urban
Development (HUD) that buys mortgages and pools them to form securities
that are then sold to investors.
- Gross Domestic Product (GDP)
- The value of all goods and services provided within the borders of a
nation. In the United States, GDP is determined quarterly by the
Department of Commerce.
- Gross margin
- A percentage of how much of each dollar of sales is left over after
the costs to make the product are subtracted. It is calculated by
dividing gross profits (sales minus cost of goods sold) for a period by
the revenues for the same period.
- Gross National Product (GNP)
- The dollar value of all goods and services produced in a nation's
economy. It includes the income from goods and services produced abroad.
The GNP adds to the Gross Domestic Product (GDP) of a country the income
of domestic residents as a result of investments abroad, and subtracts
the income earned in domestic markets that goes out to foreigners
- Growth and income fund
- A mutual fund that pursues long-term growth of capital as well as
current dividend income from stocks. This would describe virtually all
stock mutual funds to some degree, but the term is used to designate a
fund that expressly dedicates a portion of its assets to stocks that pay
- Growth stocks
- Companies believed to be growing earnings and sales faster than the
average company in the market. Growth stocks usually pay little or no
dividend, as they are still at a stage in their businesses where they
are reinvesting most or all of their earnings into the further
development of new areas of the business.
- Guaranteed Investment Contract (GIC)
- Often a choice for 401(k) plan participants, though not a very good
choice for those that are not close to retirement. A GIC is an agreement
between an insurance company and a corporate profit-sharing or pension
plan that guarantees a specific rate of return over the time span of the
agreement. However the specific rate of return will not be very
competitive with the historic rate of returns for stocks. See 401(k) choices.
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