Debt Free Article

Debt Terms Glossary

Letter D

Debenture

This term describes a corporate IOU that is not backed by that company’s assets, so it riskier than a bond per se.

Debit card

Many of our debt free advocates have these. Debit cards are utilized at both the bank ATM machines for cash access as well as retail outlets to make a purchase. Debut cards immediately deduct the specified amount from a consumer’s bank account, so there is no grace period of a credit card or the float of a check. The money comes out and no interest is charged to the consumer so no credit card debt is created.

Defined benefit plan

This is a pension plan that utilizes a mathematic formula to figure out the worker’s pension, which typically is tied to years of service and earnings. With this type of pension plan, it is up to the company to contribute enough to the plan to provide the retirement income prescribed by the formula created for it.

Defined contribution plan

This is a pension plan in which the company (and many times the worker) contributes a specific amount each year to a plan that is invested in securities, mutual funds, or some sort of insurance deal. The employee takes the investment risk, and if the investments do not perform well, the employee will have less available at retirement.

Discretionary account

Important to nay debt free wannabe who invests, discretionary accounts are brokerage accounts where the customer gives the broker the authority to buy and sell securities at their discretion – meaning the customer does not have to ok the sale or purchase. This is a good idea for those debt free readers out there that invest a lot of money.

Dividend

Dividends are simply shares of a company’s earnings paid out quarterly to stockholders, typically cash, at times additional shares are offered instead.

Dividend reinvestment plan

This is a program in which the company automatically reinvests a shareholder’s cash dividends in additional shares of its common stock.. This takes place typically without the usage of a brokerage charge to the shareholder. Many of our debt free investors may know this program as a DRIP.

Dollar cost average

This is an investment program that invests a certain amount of money on a regular schedule no matter the cost of the shares at that time. So, in the long term, dollar cost averaging results in your buying more shares at low prices than you would purchase at high prices. A good way to invest for our debt free advocates in the long term.

Dow Theory

This is a belief that a major trend in the stock market is not signaled by one index by itself but must be confirmed by to indexes, most specifically, a new high or low must be recorded by both the Dow Jones industrial average and the Dow Jones transportation average before it can safely be declared that the market is headed in one direction or the other. This is a very interesting concept for many of out debt free advocates out there.

Due diligence

This is the work performed by a broker or other rep in order to explore and comprehend an investment completely before recommending it to a client. This is definitely something our debt free customers investing out there want their rep to do.

Duration

When applied to bond mutual funds, duration is the measure of the sensitivity of the fund’s portfolio to a one percentage point change in interest rates. For example, the portfolio of a bond fund with a duration of 6 years can be expected to lose 6% of its value if the interest rates on similar bonds rise by 1 percentage point. Additionally, the fund should also gain 6% in its value if rates on similar bonds decline by one percentage point.

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