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D

DSC (deferred sales charge)

A fee charged when you sell DSC-class 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 a way to avoid sales charges altogether if the fund is held for several years.

Derivatives

Derivatives are investments that are "derived" from something else. For example, options are derivatives because the option has an underlying stock, commodity or other asset on which its price is based. Futures, forwards and options are the most common types of derivatives, which are used to generate returns and/or hedge away certain risks.

Directional

Directional trading involves taking long or short positions on the belief that profits can be made by correctly predicting the direction of a security.

Distressed securities

Distressed-securities funds buy debt, equity or "trade claims" of companies that are bankrupt or otherwise in financial trouble. Until these firms are restructured or other remedial action has been taken, their securities often trade significantly below par value and attract distressed securities managers anxious to benefit from a turn-around they expect can be realized.

Diversification

A strategy that seeks to minimize overall portfolio volatility (risk) by spreading investments across multiple securities and lowly correlated asset classes. Diversification is the basic premise behind Modern Portfolio Theory.

Dow Jones industrial average (DJIA)

A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including, stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.

Downside standard deviation

Also known as semi-variance or semi-deviation, downside standard deviation is similar to standard deviation except that it only considers returns below a defined target. The target can be a constant (example 1%), a series (equity benchmark or index) or the investment's own mean return.

Drawdown

A drawdown refers to any peak-to-valley decline a fund has suffered, and usually is quoted as the percentage decline from the peak to the trough.

Due diligence

Due diligence refers to both the quantitative and qualitative investigation process conducted prior to making an investment decision by a prudent person exercising reasonable care. Also see Page