Default To default is to fail to make timely payments of interest and principal as they come due or to meet some other provisionof a bond indenture. In the event of default, bondholders may make claims against the assets of the issuer in order to recoup their principal.
Defined Benefit Plan A defined benefit plan is a qualified retirement plan under which a retiring employee will receive a guaranteed retirement fund, usually payable in installments. Annual contributions may be made to the plan by the employer at the level needed to fund the benefit. The annual contributions are limited to a specified amount, indexed for inflation.
Defined Contribution Plan A defined contribution plan is a retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.
Diversification Diversification is the process of optimizing an investment portfolio by allocating funds to a number of different assets. Diversification minimizes risks while maximizing returns by spreading out risk across a number of investments. Different types of assets, such as stocks, bonds, and cash funds, carry different types of risk. It is important to diversify among assets with dissimilar risk levels for an optimal portfolio. Investing in a number of assets allows for unexpected negative performances to balance out with or be superceded by positive performances.
Dividend A dividend is a payment made by a company to its shareholders that is a portion of the profits of the company. The amount to be paid is determined by the board of directors and dividends may be paid even during a time when the company is not performing profitably. Dividends, when paid, are normally paid out to shareholders on a quarterly basis. Dividends may be paid directly to the investor or reinvested into additional shares of the company’s stock. Dividends must be declared as income in the year they are received.
Dow Jones Industrial Average The Dow Jones Industrial Average is a price weighted average to which the performance of individual stocks can be compared; it is a means of measuring the change in stock prices. This index is a composite of 30 Blue Chip companies currently including such companies as IBM, Johnson and Johnson, and Kraft Foods. These 30 companies represent not just the United States; rather, they are companies involved with commerce on a global scale. The index is computed by adding the closing prices of these 30 stocks and dividing by an adjusted number which takes into account stock splits and stock dividends equal to 10% or more of the market value of an issue as well as for substitutions and mergers. The average is quoted in points, not dollars.