The Deutscher Aktien 30 Index, otherwise known as the DAX 30, is a German stock market index that tracks the top 30 high cap companies listed on the German Frankfurt Stock Exchange, and is a good figure for representing the market performance as a whole. Using the Xetra trading system, the DAX 30 is calculated in almost real time, updating every 60 seconds. They use a free float weighted system, meaning only companies that have stocks freely available for the public to trade are listed.
Like the S&P 500 and the FTSE 100 in the UK, the DAX 30 is considered a very important economic figure and is quoted by most analysts and financial news outlets, as a way of summarizing the entire Frankfurt Stock Exchange’s performance.
The DAX index was first created in 1988 with the standard base line of 1000 and past data to help. Today it represents around 75% of the entire Frankfurt Stock Exchange market capitalization.
To be included in the DAX 30, the company must have a valid listing on the Frankfurt Stock Exchange, have publicly traded stock with no limitations and must be within the top tier of total company capitalization.
Some of the companies listed on the DAX 30 as of 2009 include BMW, Adidas, Volkswagen Group and the Deutsche Bank
The date of a bond issue from which a bond begins to accrue interest.
Department of commercial bank that engages in the underwriting, trading and sale of municipal (or other) securities.
Unsecured debt obligation, issued against the general credit of a corporation, rather than against a specific asset.
An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date. Bonds and other debt instruments have a defined life, a maturity date and normally pay a fixed interest rate or coupon.
Principal and interest.
The ratio of net revenues to the debt service requirements.
The debt ratio is the ability to pay a property’s monthly mortgage payments from cash profits made from rental properties. This is a ratio that is used as a guide by banks and other lenders to understand wither a property they might lend money on will generate enough profit that the borrower will have the finances to repay the amount of the loan that has been borrowed from the financial institution.
Debt ratio is done, by calculating the annual net operating income of the property, along with the net annual debt; this will include the principal borrowed and the interest on the principal. The ratio does not include the escrow payments when these amounts are divided.
This is also done for one dwelling home buyers at some lending institutions by using their personal debts, along with their income. Personal debts include all expenses; credit card debt, child support, student loans, home owners insurance, vehicle loans and other loans. The other things that can be figured in are groceries, utilities, business expenses and any other kind of reoccurring debts. These are then divided by the gross monthly income. The usual standard debt ratio to income that a lender looks for is no higher than approximately 36% of the monthly gross income. Certain home loans will allow up to 40% of debt to income ratio – these are usually federal types of home mortgages.
The Debt/Equity ratio is a measure of a company’s reliance on debt, otherwise known as its financial leverage. It is used as an indicator as to what proportion of equity and debt the company is using to fund its assets and is therefore calculated by:
Total Liabilities / Equity
Depending on the company they may not use every liability and stick only to long term loans that have a lot of added interest.
If a company has a high debt to equity ratio it simply means that they used a lot of outside financing (such as business loans) to finance their company, meaning a lot of the business’s expenses go towards repaying these loans.
A business that somehow got funding elsewhere and is relatively free of debt, will have a low debt to equity ratio and will therefore be able to utilize more of its revenue. However if a lot of debt was used to finance increased operations and output then the company could potentially make more revenue than it would have without this outside financing, meaning a middle line has to be found between using outside financing and getting in to debt, of finding funding gradually.
Debt to equity is very industry specific; and it also really depends on the company at hand and the way they chose about doing things. It must be noted that neither a company with a high debt to equity ratio or a company will a low ratio is necessarily better than each other; it all depends on how they operate.
Preferred stock can be classed as component of debt or equity, but the particulars of the preferred stock need to be taken in to account.
A discount greater than traditional market discounts of 3%.
A failure by an issuer to: (I) pay principal or interest when due, (ii) meet non-payment obligations, such as reporting requirements, or (iii) comply with certain covenants in the document authorizing the issuance of a bond (an indenture).
The risk that a company will be unable to pay the contractual interest or principal on its debt obligations.
A defined benefit plan is an employer maintained plan that pays out a specific, pre-determined amount to retirees. Defined benefit plans are guaranteed by PBGC.
A defined contribution plan does not promise a specific benefit at retirement, but does provide regular, set contributions to a pension fund. Defined contribution plans tend to be less expensive than defined benefit plans.
A sustained drop in the prices of goods and services.
In economics refers to an increase in the spending power of a country’s currency. In other words after deflation $1 can buy more than it did a few years ago. This is reflected by a decrease in prices.
(the opposite of inflation)
It is misleading to suggest that deflation is simply when things get cheaper, because in a stable economy as products and services decrease in price, the level of wages also generally decrease in an equal ratio meaning consumers can still only buy the same amount of items, it just takes less physical money. For example:
A loaf of bread costs $1 and milk costs $2
Eric gets $5 a day and buys his bread and milk, leaving him with $2.
After deflation a loaf of bread costs $0.50
and milk costs $1 However Eric’s wage has been decreased to $2.50 per day.
After he buys his bread and milk he’s left with $1.
Eric is no better off than before deflation.
There is an overlap period. It takes a while for wages to catch up, meaning there may be a spike in consumer spending during this overlap period.
Deflation however is not necessarily a good or neutral thing. It often occurs after a reduction in the money supply and availability of credit, which in turn usually comes from a recession. The fall in prices is a natural way to get consumers spending again but this doesn’t happen right away. It is therefore fair to say that around the time of deflation consumer spending is down (there is less demand for products). So businesses output is down (they may downsize); this means more unemployment .So generally as prices fall so does everything else. Eventually after a period of deflation things will climb back up.
A financial product that derives its value from an underlying security. In the tax-exempt market, there are primary and secondary derivative products.
Depreciation (the opposite of appreciation) is an accounting term that refers to the decrease in value of an asset over time in comparison with its historical or purchase price, such as a home or building, although it is not directly linked to the market value of the asset and is more to do with its internal value to the business or person who owns it. One of the main reasons to calculate depreciation and use it in accounts is to simply “window dress” the business’ finances in order to decrease the tax on income, (this is neither illegal nor frowned upon).
It is explained that depreciation occurs over time due to general wear and tear on the building such as deterioration because of age, advances in technology or the depletion of its resources (land containing bon renewable resources). Using a hypothetical example, if you bought boat to export goods and then planes were invented your boat would have lost value because of technological advancement.
This depreciation amount is included in your financial records as a cost and therefore lowers your profit margin. This in turn means you have less tax to pay on the profits, meaning more retained profit (in theory) and less to pay to the tax man. To people outside of business this can seem quite a sly and unethical business practice, although if done by a qualified accountant and not blatantly exaggerated then depreciation is a legally and morally accepted practice that all business use and are entitled to use.
When calculating depreciation it is standard practice for accountants to make it an annual occurrence, rather than a monthly one, and when the calculation is undertaken it is compared with the original value of the asset. This historical value minus the deprecation amount is called the book value.
A tax-deferred transfer of assets from one qualified retirement plan to another qualified retirement plan or IRA. Sometimes called a “trustee to trustee” transfer. The transfer is made without any funds being sent directly to the plan participant.
The amount by which the par value of a security exceeds its purchase price. For example, a $1,000 par amount bond which is currently valued at $980 would be said to be trading at a two percent discount.
A bond that is valued at less than its face amount.
The opposite of compounding, discounting allows an investor to multiply an amount by a discount rate to compute the present or discounted value of an investment. As an example $1,000 compounded at an annual interest rate of 10% will be $1,610.51 in five years. The present value of $1,610.51 realized after five years of investment is $1,000, when discounted at an annual rate of 10%.
The effective spread to maturity of a floating-rate security after discounting the yield value of a price other than par over the life of the security.
The interest rate used in discounting future cash flows; also called the “capitalization rate.”
The key interest rates central banks charge on overnight loans to commercial and member banks.
In the U.S., the interest rate used by the Federal Reserve on loans to its member banks. Changes in the rate by the Federal Reserve generally indicate future changes in monetary policy.
In Europe, the European Central bank focuses on three key interest rates for the Euro area as its way to manage inflation and the economy: the main short term lending interest rate on the main refinancing operations (MRO); the rate on the deposit facility which banks may use to make overnight deposits; the rate on the marginal lending facility, which offers overnight credit to banks. The rates are closely watched by markets as setting these rates are a prime way for a central bank to manage inflation. Commercial banks use the discount rate as a benchmark for the interest rates they charge on other financial instruments and products, including commercial and consumer loans.
When money is withdrawn from a 401k plan, the withdrawal is referred to as a distribution. 401k plan assets can be withdrawn without penalty after age 59 1/2. Employees are required to begin taking distributions after age 70 1/2.
A strategy by which an investor distributes investments among different asset classes and within each asset class among different types of instruments in order to protect the value of the overall portfolio in case of changes in market conditions or market downturn and reduce exposure to risk. For example, a diversified bond portfolio might include different types of bonds and/or bond funds with different maturities and coupons.
Payments by a company to its stockholders. A dividend is usually a portion of profits. Payment of dividends on common stock is generally discretionary. Dividends to common-stock shareholders may be withheld if business is poor or if the corporation’s directors decide to retain earnings to invest in business operations.
Annual dividends per share divided by price per share. An indication of the income generated by a share of stock. The dividend yield plus capital gains percentage equals total return
Dollar Cost Averaging (abbreviated as DCA) is a concept and technique which suggests that investing a small fixed amount at regular intervals in to the same investment is safer than investing one large lump sum. It spreads the market fluctuations out over several years so the total investment is not subject to one downturn or one upswing, but several over the years, averaging out the risk.
The theory is that investing a lump sum at once puts it at risk to the current market conditions, whereas gradually building up the portfolio insulates that risk by buying shares when prices are low, as well as high. Investors claim that in the long run it works out that you end up buying more shares at a lower price than at a higher price.
Although many investors may use this strategy without noticing, the method of using Dollar Cost Averaging simply involves deciding how much in total that you want to invest and how many months you want to make regular payments in to the investment. You obviously have to research your choice of investment and whether you are looking to buy stock, bonds, open a savings account etc.
An example of DCA in action is shown below:
Eric has $10,000 to invest in Microsoft, which he can invest right now, or over a period of time. He opts to invest $500 a month, over 20 months.
Right now $10,000 worth of shares would have purchased 300 shares at $33.33 each.
However after a few months the share price may have decreased and you would have purchased several shares at a lower price utilizing dollar cost averaging. If the share price picked back up by the end of the year you would have had more holdings than if you invested all at once
Securities that are exempt from state and local as well as federal income taxes are said to have double or triple tax-exemption.
Securities that are exempt from state and federal income taxes.
A double top is a term used in technical analysis to describe a reversal pattern that occurs in a rising market. A double top has two prominent peaks on the price chart at about the same level. It signifies a major resistance area and is a strong signal that a rally is coming to an end and that a downturn is possible. A double bottom is a reversal pattern that occurs in a falling market and signifies a major support area and that a rally is possible. It has two troughs at about the same level.
You cannot watch the news or read the paper without seeing a reference to things like the stock exchange, the NASDAQ or the Dow Jones. Despite this a good proportion of people have no idea what the Dow actually is. Well the Dow Jones and its various abbreviations and combinations (such as the DJIA, Dow 30, INDP or the Dow) is one of the very important North American stock market indices, technically known as the Dow Jones Industrial Average. Ok but what does this actually mean?
The Dow Jones Industrial Average is a measurement that simply refers to the average value of thirty large company’s industrial stocks, such as Microsoft, Coca-Cola, General Motors, IBM, Goodyear, General Electric and Exxon. These and several other companies make up the average and give an overall picture of how the stock exchange as a whole is doing. Somebody simply takes 30 top companies and does some math. Despite this simplicity Dow Jones is by far the most read index in the world. It dates back to 1896 when it was consisting of only 12 stocks. It is during times of economic crisis when investors and regular Joes take notice of the Dow Jones and it is fair to say if the economy is doing bad, so is the Dow and vice versa.
The Dow Jones has many critics that claim taking just 30 companies and plastering their success all over the news is not only misleading in regards to the whole market, but also dangerous for new investors that take it for gospel and think trading successfully is a lot simpler than it actually is.
Possibility that a bond’s rating will be lowered because the issuer’s financial condition, or the financial condition of a party to the financial transaction, deteriorates.
Dual-currency bonds are bonds in which principal payments are in one currency and coupon payments are in another currency. This type of bond is used for foreign bonds, when an issuer issues bonds in a foreign country and makes coupon payments in that country’s currency, but principal payments are made in the currency of the issuer’s country of residence.
The effect that each 1% change in interest rates has on a bond’s market value. Duration takes into account a bond’s interest payments in measuring bond price volatility and is stated in years. As an example, a 5-year duration means that a bond will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%.
The duration of a bond is a measure of its price sensitivity to interest rates movements, based on the average time to maturity of its interest and principal cash flows. Duration enables investor to more easily compare bonds with different maturities and coupon rates by creating a simple rule: with every percentage change in interest rates, the bond’s value will decline by its modified duration, stated as a percentage. Modified duration is the approximate percentage change in a bond’s price for each 1% change in yield assuming yield changes do not change the expected cash flows. For example, an investment with a modified duration of 5 years will rise 5% in value for every 1% decline in interest rates and fall 5% in value for every 1% increase in interest rates.
Bond duration measurements help quantify and measure exposure to interest rate risks. Bond portfolio managers increase average duration when they expect rates to decline, to get the most benefit, and decrease average duration when they expect rates to rise, to minimize the negative impact. The most commonly used measure of interest rate risk is duration.