D

Daily Valuation

A method used to determine on a daily basis the account value of each participant. It provides daily allocation of plan contributions, distributions, investment earnings and transfers.

Death Benefit-Only Plan

A plan in which the only benefit provided is a death benefit to the employee's designated beneficiary.

Debenture

An unsecured bond. This type of bond is backed only by good faith and credit of the company issuing it (unlike a secured bond which is backed by some form of collateral). Because a debenture carries a higher risk than a secured debt instrument, it usually offers the fund an incentive such as a higher rate of interest.

Debt

Any investment in which you lend your money for specific term and rate of interest - i.e., bonds.

Debt-to-Equity Ratio

Long-term debt divided by stockholders' equity. The ratio identifies the relationship of debt to ownership interest in the firm's financial structure. A measure of financial risk.

Deductible IRA

An individual retirement account that allows the owner to deduct the amount of the contribution from current federal income taxes.

Deep Discount Bond

A bond that has a coupon rate far below rates currently available on investments and whose value is at a significant discount from par value.

Default

The bond issuer's failure to pay the interest or principal that has come due on his bonds.

Default Risk

The risk that a company will be unable to pay the contractual interest or principal on its debt obligations.

Deferred Compensation

Income not currently payable to an employee but payable in the future.

Defined Benefit Plan

A type of qualified plan that provides a fixed benefit to participants at normal retirement age. Defined benefit plans generally need to be certified annually by an enrolled actuary who determines the mandatory annual contributions necessary to fund the promised benefits.

Defined Contribution Plan

A type of qualified plan in which a participant's benefits are based solely on the participant's account balance; the account balance depends on the level of employer and employee contributions and the earnings on those contributions.

Deflation

The increase of purchasing power due to general decrease in the prices of goods and services.

Depreciation

Decrease in the value of an investment over time.

Determination Letter

A letter issued by the IRS indicating whether or not a particular plan meets the IRS's requirements.

Direct Rollover

A tax-free transfer of cash or other property between two qualified plans or IRAs, where the transferred cash or property never passes through the hands of the owner.

Discount Bond

A bond that is valued at less than face amount.

Discount Broker

A stockbroker who charges a reduced commission and provides no investment advice.

Discount Rate

The interest rate used in discounting future cash flows; also called the "capitalization rate."

Discretionary Contributions

Any employer contributions to a 401(k) or profit sharing plan that are not mandated by the terms of the plan.

Disqualified Person

As defined by the IRS, any person or entity prohibited by the IRC from entering into certain transactions with a qualified plan because of the person's relationship with the plan -- such as fiduciary or plan sponsor.

Distribution

A mutual fund's payment to shareholders of the profits,interest, or dividends it has earned on its investments. In a 401(k) plan the distributions are tax-deferred and automatically reinvested, giving the benefit of compounding.

Distribution & Withdrawals

When money is withdrawn from a 401(k) plan, the withdrawal is referred to as a distribution. 401(k) plan assets can be withdrawn without penalty after age 59 1/2. Employees are required to begin taking distributions after age 70 1/2.

Diversification

The practice of spreading your risk by investing in several asset classes - each with it's own risk characteristics.

Dividend

The portion of a company's profit (after tax and overhead is paid) a stock fund receives if the fund owns dividend-paying stock in the company. Income paid by your investments.

Dividend Payout Ratio

Annual dividends per share divided by annual earnings per share.

Dividend Yield

Annual dividends per share divided by price per share. An indication of the income generated by a share of stock. The dividend yield plus capital gains percentage equals total return.

Dollar Cost Averaging

A technique whereby an investor contributes the same amount on a fixed schedule, regardless of changes in the market. On average, the investor should end up buying more investments at a lower price and fewer investments at a higher price.

Dow Jones Industrial Average (DJIA)

The stock price average of 30 blue chip stocks that represent about 15% to 20% of the market value of the stocks traded on the New York Stock Exchange. The daily performance of the Dow Jones Industrial Average is used on nightly television news broadcasts as an indicator of the New York Stock Exchange performance --- but it may not be an indication of how your mutual funds performed.