Glossary – Letter D

Daily change

This is the difference, in dollars, between a fund’s current price and its price as of market close on the prior business day.

Day order

An order to buy or sell a security valid only on the day the order is given.

Day trader

See In-and-out trading.

Dead cat bounce

Slang financial expression to describe a sharp increase in share prices after a major decline. (It originated from an old Wall Street saying: Even a dead cat will bounce once if it falls far enough.)

Death benefit

The payment made to a beneficiary from an annuity or insurance policy when the policyholder dies. A common feature of segregated funds.


A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by property or assets.


Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount on a set date.

Debt securities

A debt security refers to money borrowed that must be repaid that has a fixed amount, a maturity date(s), and usually a specific rate of interest. Some debt securities are discounted in the original purchase price. Examples of debt securities are treasury bills, bonds and commercial paper. The borrower pays interest for the use of the money and pays the principal amount on a specified date.

Deemed disposition

Under certain circumstances, taxation rules state that a transfer of property has occurred, even without a purchase or sale. For example, there is a deemed disposition on death or emigration from Canada.


A bond is in default when the borrower has failed to live up to the obligations under the terms of the agreement. Examples of this are declining to pay interest or sinking fund payments or failure to redeem the bonds at maturity.

Defensive stock

Stock of a company with continuous dividend payments, which has demonstrated relatively stable earnings despite poor economic conditions.

Deferred income taxes

Income tax that would otherwise be payable currently, but which is not paid immediately. This is because larger allowable deductions are made when calculating taxable income than when calculating net income in the financial statements. An acceptable practice, it is usually the result of timing differences and represents differences in accounting reporting guidelines and tax reporting guidelines.

Deferred pension

A specified pension determined when a member’s employment or plan terminates that is not payable until sometime later, usually at retirement.

Deferred Profit Sharing Plan (DPSP)

In a DPSP an employer makes cash contributions for an employee’s retirement plans out of business profits. The contributions and earnings accumulate tax-free until withdrawn.

Deferred sales commission rate %

The deferred sales commission rate is expressed as a percentage. This rate is a redemption charge the investor pays when withdrawing money from an investment (selling mutual fund shares). Also known as a back-end load, these deferred charges typically go down each year you hold the fund, until eventually they reach zero. Deferred sales charges give investors an incentive to buy and hold, as well as a way to avoid some sales charges.

Deficiency letter

A securities commission letter sent to a company that has submitted a preliminary prospectus on a planned new issue of the company’s securities. The letter poses any questions the commission wants answered, and outlines any recommendations for changes to the prospectus. When all points raised in the letter are resolved, the issue’s final prospectus may be filed.


A financial situation for an individual, company or government where expenses exceed income.

Defined benefit pension plan

A pension plan that defines a benefit for an employee upon that employee’s retirement. The amount of the benefit depends on factors such as years of contribution to the plan or years of employment. A specific income is guaranteed and known for retirement with no risk but it is set based on earnings and years worked, with no other way to increase it.

Defined contribution plan

A pension plan that defines the amount of employer and employee contributions (if any) to the pension fund, determined on an individual account basis. This type of plan is also known as a money purchase plan. The benefit the member will receive on retirement is determined at the date of retirement and is based on accumulated contributions, investment income and annuity rates. The employee bares all of the investment performance and management risks.

Defined-Benefit Pension Plan

Often referred to simply as a ‘DB Plan’ this type of pension is an employer-sponsored retirement plan where employee pension benefits are based upon a formula using factors such as salary history and duration of employment. The pension plan’s investment risk and portfolio management are entirely under the control of the company.

Delayed opening

The postponement of trading of a security on a stock exchange beyond the normal opening because of market conditions. The officials of the exchange postpone trading of an issue if they feel conditions warrant a delay. Such conditions might include an unusual volume of buy or sell orders, an imbalance of buyers or sellers, or pending corporate news that require review.


The removal of a security’s listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.


Securities sellers must deliver the certificates on or before the third business day after the sale. Delayed delivery refers to a transaction in which there is a clear understanding that delivery of the securities involved will be delayed beyond this three-day period.


The process of converting a mutual company owned by its voting policyholders to a stock corporation owned by its shareholders.


Refers to the consumption of natural resources which are part of a company’s assets. Since oil, mining and gas companies deal in products that cannot be replenished, depletion reduces the company’s natural assets over a specified time period. The recording of depletion is a bookkeeping entry similar to depreciation and does not involve the expenditure of cash.

Deposit insurance

An insurance plan designed to protect the money you deposit if a bank, credit union or trust company fails (see CDIC and CUDIC).


Systematic charges made against earnings to write-off the cost of an asset over its estimated useful life because of wear and tear through use, action of the elements, or obsolescence. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose. It reduces the company’s fixed assets to zero over a specified time period.


Securities that are “derived” from another security such as a stock or a commodity. Derivatives are contracts between buyers and sellers. Futures and options that trade on exchanges are examples of derivatives. These securities trade in over-the-counter markets.

Digital Cash

A payment instrument in which monetary value is stored in electronic form.

Note: Stored-value products include “hardware” or “card-based” devices (prepaid cards, such as electronic purses) and “software” or “network-based” products (e.g., cybercash). These products are prepaid; that is, the monetary value is purchased in advance by the consumer, stored electronically, and reduced whenever purchases are made.


Reducing the actual or potential earnings per share by issuing more shares or giving options to obtain more.


Person elected by voting common shareholders at the annual meeting to direct company policies.

Disaster Out Clause

A clause in an underwriting agreement allowing the underwriter to cancel the agreement, should a law, event or major financial occurrence transpire that adversely affects financial markets in general or the issuer in particular.

Disciplinary action

Action taken by a securities regulator to discipline an individual, company or registrant. This can include a fine or a ban from the securities market.

Disclaimer Clause

Securities commissions require that all prospectuses carry a disclaimer on the front page stating that the securities commission itself has in no way approved the merits of the securities being offered for sale.


The amount by which a preferred share or bond sells below its par value.

Discount brokers

Brokerage firms that offer lower commission rates than investment dealers, but do not offer the services that investment dealers do, such as advice, research and portfolio planning.


When some anticipated event such as increased dividends or lower earnings has already been reflected in the market price of a stock, it is said to be “already discounted” by the market.

Discretionary Account

A securities account where the client has given specific written authorization to a partner, director or qualified portfolio manager of an investment dealer to select securities and execute trades on behalf of that investor. These are opened up as a matter of convenience to clients who are unable to attend to their own accounts through illness or absence from the country.

Discriminatory price auction

An auction technique in which bonds are sold at the actual bid price; used to sell Government of Canada conventional marketable bonds and treasury bills.

Distribution currency

The distribution currency is the currency in which the fund is valued and in which fund distributions are denominated, either Canadian or US dollars.

Distribution Yield

The distribution yield is different from the investment yield.

The distribution yield is calculated by dividing the payments or distributions received from an investment by the capital you have invested in the investment.

The distribution can include investment earnings (dividends, interest, capital gains) plus a return of capital. For example if you invest $10,000 in an investment that earns $500 per year, that investment is said to have an investment yield of 5.0%.

But if that same $10,000 investment has paid you $1,200.00 in the same 12-month period, then the investment is said to have a distribution yield = 12% ($1,200 divided by $10,000)


Payments to investors by a mutual fund from income or from profit realized from sales of securities.


Spreading investment to reduce risk by buying different securities from various companies, businesses, locations and governments.

Dividend yield

Dividend yield is defined as the annual dividend declared by the company, divided by the price of the stock at the most recent holdings date. Low yields are normally associated with aggressive, “growth-oriented” stocks, while high yields are normally associated with large, stable companies such as utilities and banks.


An amount distributed out of a company’s profits to its shareholders in proportion to the number of shares they hold. A preferred dividend usually is for a fixed amount, while a common dividend may fluctuate with the profits of the company. A company is under no legal obligation to pay either preferred or common dividends.

Dollar cost averaging

Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time, thereby averaging the cost paid per share.

Dow Jones Industrial Average (DJIA)

An average made up of 30 blue chip stocks that trade daily on the New York Stock Exchange. The DJIA is used as an overall indicator of market performance although criticism is periodically raised over how it is calculated, as well as the fact that so few companies are included so that it may not be a truly representative indicator of market activity.

Dow Jones Transportation Average

Similar to the Dow Jones Industrial Average, this average is made up of 20 transportation stocks that trade daily on the New York Stock Exchange.

Dow Theory

A theory of market analysis based upon the performance of the Dow Jones Industrial and Transportation Averages. The theory is that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When both averages dip below previous important lows, this is regarded as confirmation of a basic downward trend.

Downside deviation

The downside deviation is a value representing the potential loss that may arise from risk as measured against a minimum acceptable return, by isolating the negative portion of the volatility. It is thus similar to standard deviation, but considers only returns that fall below the minimum acceptable return. The downside deviation is used in the calculation of the Sortino ratio.

Downtick / minus tick

Sale of a security at a price below the preceding sale. For example, if a stock has been trading at $10 per share, the next trade is a downtick if it is at $9.85. Also known as a minus tick.

Draft Prospectus

A prospectus prepared for internal use and discussion by the company issuing securities and the underwriters. It is not for outside distribution and shows only basic data on the company with little final detail about the terms of the planned underwriting. It is not a legal document and does not have to be drawn up strictly to securities commission standards. It is an earlier version of a preliminary prospectus and cannot be used in offering the security.

Dumber Guy Rule

In the investing world, when an asset’s market price is solely dependent upon the amount of money chasing it, its market price is said to be subject to the dumber guy rule, where an investor buys the assets hoping some dumber investor will be willing to pay more for it at some future date. This may seem like a silly rule, however, for a number of asset types the dumber guy rule is a legitimate investment rule and is not meant to be derogatory. It simply implies that when the asset does not

  • pay an income,
  • generate revenues or profits on its own,
  • create new technologies or processes, or
  • get consumed,

… then the asset’s market price is solely dependent upon the amount of money chasing it.

So, if an asset’s price is climbing, then you might be able to make some money by buying it because a rising price almost always ensures that there will be a dumber guy ready to pay more at some point in the future.

But … buying assets that are subject to the dumber guy rule is always tricky and your success often depends upon your timing. Are you at the front of the line or closer to the back?

Unfortunately it’s pretty safe to say that usually by the time you read about an asset in the news, the line has been in place for a while and joining in will usually put you closer to the end of the line than you think – possibly making you the dumber guy.

Dutch auction

A type of auction in which the price on an item is lowered until it gets its first bid and is sold at that price. The Treasury auction is a Dutch auction.