Website Glossary

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D

Default risk

The *risk* that a company may not be able to pay you back the money you have invested.

Deposit Account

A bank or building society account which earns a steady rate of *interest* and in which your original *capital* is secure. The interest rates paid vary depending on the length of time you are prepared to lock your money away for.

Depositary

Responsible for overseeing the *fund manager's* activities in relation to an *OEIC*. Usually a large bank, the depositary must be independent of the fund manager where the fund is authorised by the *Financial Services Authority*. It acts in the interests of the investors, owning the investments in the fund on their behalf.  It also ensures that the fund is invested according to its investment objectives and that the manager complies with the regulations. The *unit trust* equivalent is known as the *trustee*.

Derivatives

A general term for *futures* and *options*. 

Discount broker

A service provided by an *intermediary* where no advice is taken. Also known as an “execution only” service, the broker will buy a product on behalf of an investor after the investor has chosen which product they would like to purchase. Discount brokers usually waive or discount the *initial charge*, as no advice has been provided. This service is often available by post and rather than pay commission you are charged a one off transaction charge.

Distributions

*Income* paid out from a *unit trust* or *OEIC* in the form of *interest* or *dividends*.

Distribution Yield

Reflects the amounts that may be expected to be distributed over the next twelve months as a percentage of the mid-market unit price of the fund as at the date shown.   It is based on a snapshot of the portfolio on that day.   It does not include any preliminary charge and investors may be subject to tax on distributions.  

Diversification

A term used to describe the spreading of *risk* by investing in a number of different companies and *assets*. Doing so will mean that you won’t have all of your eggs in one basket.

Dividends

*Income* paid on *shares* out of company profits.

Dividend distributions

*Income* paid out by *unit trusts* and *OEICs* that invest mainly in *equities*.

Dual pricing

Both *unit trusts* and *OEICs* can be dual-priced, such funds have an offer price at which you buy, and a lower *bid* price, at which you sell.  The difference between the two prices is known as the *bid/offer spread*. The buying price is normally higher than the selling price as this includes the *initial charge* to be paid to the *fund manager*.