Glossary: D

Debt – An obligation to repay a sum of principal, plus interest. In corporate terms, debt often refers to bonds or similar securities.

Deductible – the dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.

Deferral – A form of tax sheltering that results from an investment that offers deductions during the investor’s high-income years, and/or postpones capital gains or other income until after retirement or during another period when the income level is expected to change.

Deferred Profit Sharing Plan – A plan that allows an employer to set aside a portion of company profits from the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.

Defined benefit pension plan – A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.

Defined contribution pension plan – a registered pension plan that does not promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan.

Denomination – The principal amount, or value at maturity, or a debt obligation. Also known as the par value or face value.

Dependents – usually the spouse and unmarried children (adopted, step or natural) of an employee.

Depreciation – Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.

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

Diversification – The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.

Dividend (Life Insurance) – A return of part of the premium on participating insurance that is based on the insurer’s investment, mortality, and expense experience. Dividends are not guaranteed.

Dividend (Investments) – A per-share payment designated by a company’s board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.

Dividend fund – A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.
Dividend tax credit – An income tax credit available to investors who earn dividend income through investments in the shares of Canadian Corporations.

Dollar cost averaging – A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.