Money Terms in Plain English.
Terms marked UK are specific to the UK. A nation's name, like Scotland, means the rule only applies there.
D
- Daily reset
- A leveraged fund starting again each day, so it only aims for its multiple of one day's move.
- In plain English:Leveraged funds aim to double or triple each day's move, then start again the next day. Over many days, your result can be very different from double or triple.
MoreLess about Daily reset
On a day the index rises 10%, a 2x fund rises 20%. But up and down days mixed together can leave it down even if the index ends flat.
These funds are built for short-term trading and are often unsuitable to hold for long. The longer and bumpier the period, the bigger the gap.
For example: An index rises 10% one day and falls 9.1% the next, ending where it started. A 2x daily fund ends about 1.8% down.
- Article inside Foliopeak: How 3x Daily Funds Work
- DAO (decentralised autonomous organisation)
- A group run by blockchain rules, where token holders vote instead of having bosses.
- In plain English:A group run by computer code on a blockchain, where people holding its tokens vote on decisions instead of having a boss.
MoreLess about DAO (decentralised autonomous organisation)
DAO stands for decentralised autonomous organisation. Members usually buy tokens that give them votes on how a shared pot of money is spent.
Code can have bugs, and votes can be swung by a few big holders. In some countries members have been held personally responsible for the group's debts.
For example: In 2016 a DAO raised over $150 million in crypto and lost about a third of it when someone used a flaw in its code.
- Article inside Foliopeak: Cryptocurrency
- Dark pool
- A private trading place where big investors trade large blocks of shares out of view.
- In plain English:A private place where big investors can buy and sell large amounts of shares without the price moving before the deal is done.
MoreLess about Dark pool
They're legal and regulated, and are run by banks and exchanges. A large order shown openly could push the price up or down before it's filled, which hurts the buyer or seller.
Critics say they make prices less clear for everyone else, because a big share of trading happens out of sight.
For example: A pension fund wants to sell millions of shares in one company. It uses a dark pool, so the price doesn't drop while it sells.
- DAX
- Germany's main stock market index, of its forty biggest companies.
- In plain English:A list of forty of Germany's biggest companies, used to show how German shares are doing.
MoreLess about DAX
It's made of the 40 biggest companies listed in Frankfurt, and counts dividends as if they were reinvested.
Its companies include car makers, chemical firms and software groups. It's often used as a guide to how Europe's biggest economy is doing.
Because it counts dividends, it can look like it's done better than indexes such as the FTSE 100 that don't. Like-for-like comparisons need the same basis.
For example: A UK investor buys a fund tracking the DAX to own a slice of Germany's largest companies.
- See also: Index
- Day trading
- Buying and selling within the same day to try to profit from small price moves.
- In plain English:Buying and selling shares or other things many times in a day to try to make quick profits. Most people who try it lose money.
MoreLess about Day trading
Day traders close every position before the market shuts, so they don't hold anything overnight. Many use CFDs or spread betting, where losses can be larger than what was put in.
Studies of retail traders repeatedly find most lose money over time. Profits may also be taxed as income if HMRC sees it as a trade.
For example: Someone makes 20 trades a day for a month. The small gains are wiped out by dealing costs and a couple of big losing trades.
- Dead cat bounce
- A short rise in prices after a big fall, before they carry on falling.
- In plain English:After prices fall a lot, they sometimes jump back up a little before falling further. That short bounce is the dead cat bounce.
MoreLess about Dead cat bounce
The name comes from the grim saying that even a dead cat will bounce if it falls from high enough. It's used to warn against buying just because prices have started to rise.
Bear markets often have several short rallies. Trying to guess which one is the real turn is very hard.
For example: A share falls from £10 to £4, jumps to £5 over a week, then slides to £3.
- See also: Bear and bull markets
- Dealing charge
- A fee for each time you buy or sell an investment.
- In plain English:A fee your platform or broker charges every time you buy or sell. Frequent trading can make these add up.
MoreLess about Dealing charge
Some platforms charge less for regular monthly investing than for one-off trades. Others charge nothing per trade but make money in other ways, such as a wider spread or a currency fee.
For small amounts a flat fee can be a large share of what you invest, so check before making lots of small trades.
For example: Someone buys £200 of shares with a £10 dealing charge. That's 5% gone before the shares have moved.
- Article inside Foliopeak: Fund Charges - OCF, Platform Fees and the Rest
- Death benefits (pensions)UK
- What a pension pays out to others when you die.
- In plain English:What happens to your pension when you die. It might pay a lump sum or an income to your family, depending on the type of pension.
MoreLess about Death benefits (pensions)
From 6 April 2027, most unused pension pots also count towards the estate for Inheritance Tax.
Who gets the money is decided by the pension scheme, guided by an expression of wish form you fill in. Keeping it up to date after a marriage, divorce or birth matters, because a will doesn't control it.
A defined benefit pension usually pays a smaller income to a husband, wife or civil partner, and sometimes to children, rather than a lump sum.
For example: Someone dies at 68 with a pension pot and named their daughter on their expression of wish form. She can take the money tax-free.
- Article inside Foliopeak: Pensions in Inheritance Tax From April 2027, and What Changes for Families
- Death in service
- A lump sum your employer pays your family if you die while working there.
- In plain English:If you die while working for an employer that offers it, it pays your family a lump sum, often a few times your yearly pay.
MoreLess about Death in service
It's usually two to four times salary, and is often paid outside your estate, so it can be paid quickly. The scheme decides who gets it, guided by a form you fill in.
The cover ends when you leave the job, so it is worth checking what other life cover you have.
For example: An employee on £40,000 with four times salary cover dies. Their partner, named on the form, gets £160,000.
- Article inside Foliopeak: Life Insurance and Income Protection: The Gap Most Families Have
- Debit card
- A card that spends money straight from your bank account.
- In plain English:A card that takes money straight from your bank account when you pay. You can't spend more than you have, unless you have an overdraft.
MoreLess about Debit card
Chargeback is a scheme run by Visa and Mastercard, not a law, so it's weaker than Section 75, and there are time limits for claims.
Spending only what you have makes it harder to fall into debt, though an overdraft can still be used if you go past zero.
For example: Someone pays for concert tickets with their debit card. The concert is cancelled and the seller won't refund, so their bank gets the money back through chargeback.
- Debt Arrangement Scheme (DAS)Applies in Scotland
- A Scottish scheme to repay debts over time with interest frozen.
- In plain English:A scheme in Scotland that lets you pay back your debts over time, with interest and charges frozen and lenders stopped from chasing you.
MoreLess about Debt Arrangement Scheme (DAS)
It runs through an approved money adviser, and the plan is checked by a government body. You pay one monthly amount, which is shared out among the people you owe.
Your home and belongings aren't at risk while you keep to it. It shows on your credit file.
For example: Someone in Glasgow with £15,000 of card debts joins the scheme and pays £300 a month, with interest frozen, until it's all repaid.
- Debt avalanche and snowball
- Two ways to order paying off debts: dearest first, or smallest first.
- In plain English:Avalanche means paying off the debt with the highest interest first, which saves the most money. Snowball means clearing the smallest first, for quick wins.
MoreLess about Debt avalanche and snowball
Whichever order you choose, you keep paying at least the minimum on every debt. Once one is cleared, its payment moves to the next.
Small early wins from the snowball can keep people going. The avalanche saves more if you can stick with it.
For example: With a card at 25% and a loan at 8%, the avalanche pays the card first; the snowball pays whichever balance is smallest first.
- Article inside Foliopeak: Paying Off Debt: Avalanche vs SnowballGame: Snowball vs Avalanche
- Debt ceiling (US)
- A legal limit on how much the US government can borrow.
- In plain English:A limit set by law on how much the US government can borrow. If it's not raised in time, the US could fail to pay its bills.
MoreLess about Debt ceiling (US)
It's been raised or suspended dozens of times. Close calls have led to a cut in the US credit rating, in 2011 and again later.
Because US government bonds are used as a safe asset all over the world, a missed payment could shake markets everywhere.
For example: In 2011 Congress raised the limit just days before the deadline, and the US lost its top AAA grade from S&P.
- See also: Deficit and national debt
- Debt collection agency
- A firm that chases unpaid debts.
- In plain English:A company that chases people for unpaid debts, either for the lender or because it has bought the debt. It must follow strict rules.
MoreLess about Debt collection agency
It must tell you who it's acting for, what you owe and how to complain. You can ask for proof of the debt, and it should stop chasing while it checks.
Free debt charities can help you agree a payment plan. If it treats you badly, you can complain to the Financial Ombudsman Service.
For example: An agency buys an old phone bill and asks for payment. The person asks for proof, and it turns out the debt is over six years old.
- Debt consolidation
- Combining several debts into one loan with one payment.
- In plain English:Taking out one new loan to pay off several debts, so you only have one payment. It can cost more overall if it takes longer to clear.
MoreLess about Debt consolidation
It can make bills simpler and lower interest, but only helps if you stop adding new debt to the old cards.
A balance transfer card is one form, often with 0% for a time and a fee up front.
For example: Someone combines three cards charging around 25% into one loan at 9%, paying less interest each month.
- Debt management plan (DMP)
- An informal plan to repay debts at an amount you can afford.
- In plain English:An informal plan where you pay one affordable amount each month, shared between the people you owe. Free debt charities can set it up.
MoreLess about Debt management plan (DMP)
Free plans are available from debt charities, and paid firms offer them too. Most people you owe will freeze interest if the plan is fair, but they don't have to.
It's not a legal agreement, so you can leave it at any time. Missed payments can still be marked on your credit file.
For example: A debt charity sets up a plan where someone pays £200 a month shared among four card companies, and most freeze interest.
- Article inside Foliopeak: Debt Help: Free Advice and the Formal Options
- Debt Relief Order (DRO)Applies in England, Wales, Northern Ireland
- A way to have some debts written off if you have very little money.
- In plain English:If you have little money, few belongings and debts below a set amount, this can write off your debts after a year. It's cheaper than bankruptcy.
MoreLess about Debt Relief Order (DRO)
It's arranged through an approved debt adviser and has a small fee. Debts it covers are written off at the end of the year if your situation hasn't improved.
Some debts can't be included, such as student loans and court fines. You can't get credit above a small amount during it without saying you have one.
For example: Someone on benefits with no savings and card debts below the limit gets a debt relief order. A year later, the debts are written off.
- Article inside Foliopeak: Debt Help: Free Advice and the Formal Options
- Debt to income ratio
- How much of your monthly income goes on paying debts.
- In plain English:What share of your monthly pay goes on paying back debts. The higher it is, the harder lenders may find it to lend to you.
MoreLess about Debt to income ratio
Mortgage lenders look at it closely along with your outgoings. Under about 30% is often seen as healthy, and above 40% can make it hard to borrow more.
Paying off a small loan or card can lower it more than you might think, because the monthly payment goes.
For example: Someone earning £3,000 a month pays £600 a month on a car loan and card. Their debt to income ratio is 20%.
- Debt write-off
- When a lender agrees to cancel some or all of a debt.
- In plain English:When a lender agrees you don't have to pay back some or all of what you owe. It usually still shows on your credit file.
MoreLess about Debt write-off
Asking for one usually works best with proof that you can't pay, such as a long illness or very low income. A debt charity can help ask.
Usually it doesn't count as income for tax. Some formal debt solutions, such as an IVA, end with what's left written off.
For example: A lender writes off the last £2,000 of a debt for someone whose illness means they can't work, marking it partly settled.
- Article inside Foliopeak: Debt Help: Free Advice and the Formal Options
- Decentralised exchange (DEX)
- A crypto exchange with no company in the middle, where people swap coins from their own wallets.
- In plain English:A place to swap crypto directly from your own wallet, run by computer code rather than a company. There's no one to call if it goes wrong.
MoreLess about Decentralised exchange (DEX)
Trades happen through pools of coins that other users put in, and prices are set by a formula. Fees go to the people who put coins in the pools.
Mistakes such as sending coins to the wrong address can't be undone. Fake tokens with names like real ones are common.
For example: Someone swaps ether for a new token on a decentralised exchange, then finds the token's makers have emptied the pool and it's worthless.
- Article inside Foliopeak: Cryptocurrency
- Declaration of trustUK
- A legal document that records who owns what share of a home.
- In plain English:A legal paper that sets out who owns what share of a home, and who gets what if it's sold. Useful when people put in different amounts.
MoreLess about Declaration of trust
Without one, people who own a home jointly are usually treated as owning equal shares, whoever paid what. It can be drawn up by a solicitor when buying or later.
It can also set out who pays the mortgage and what happens if one person wants to sell.
For example: Two friends buy a flat. One puts in £40,000 and the other £10,000. Their declaration of trust says the first gets back their extra £30,000 before the rest is split.
- Article inside Foliopeak: Buying a Home: From Offer to Keys
- Decreasing term insurance
- Life insurance whose payout shrinks over time, often in step with a mortgage.
- In plain English:Life insurance where the amount it pays out goes down over time, usually to match what's left on a repayment mortgage. It's cheaper than level cover.
MoreLess about Decreasing term insurance
The payout should roughly match what's left on the mortgage. If the mortgage interest rate rises, the cover might fall faster than the debt.
It's not suitable for an interest-only mortgage, where the debt doesn't fall. Level term insurance is used for that.
For example: A couple with a 25-year repayment mortgage buys decreasing term cover starting at £250,000. In year 15 it would pay about £120,000, roughly what they still owe.
- Deed of variationUK
- A document that changes who inherits after someone has died.
- In plain English:After someone dies, the people inheriting can agree in writing to change who gets what, for example to pass money to their children.
MoreLess about Deed of variation
It's often used to skip a generation, such as passing an inheritance to grandchildren, or to give to charity and lower the tax bill.
It can't be done for money in return, and anyone giving something up must agree. Capital Gains Tax can be treated the same way if the deed says so.
For example: A son inherits £100,000 he doesn't need and signs a deed of variation passing it to his children, as if his mother had left it to them.
- Article inside Foliopeak: Inheritance Tax Basics
- Default (credit)
- When a lender closes your account because you stopped paying, which harms your credit record.
- In plain English:If you stop paying a loan or bill for a few months, the lender can close the account and mark it as a default, which stays on your credit file for six years.
MoreLess about Default (credit)
Before a default, the lender usually sends a formal notice giving you time to catch up. It shows the date it was registered, and the record drops off six years from then.
It makes borrowing harder and dearer for a while. Showing it as settled once paid helps a little.
For example: Someone stops paying a credit card. After four months the lender sends a default notice, then registers the default, which stays on their file until six years later.
- Article inside Foliopeak: Your Report Matters More Than Your Score
- Default fund
- The fund your workplace pension uses if you don't pick one.
- In plain English:If you don't choose where your workplace pension money goes, it's put in this fund. It's built to suit most people.
MoreLess about Default fund
It's designed to suit most people, often spread across shares and bonds and moving into safer assets as you near retirement. Charges on it are capped by law in automatic enrolment schemes.
You can usually switch funds in your scheme's app or website if you want something different.
For example: Someone joins a workplace pension at 25 and never picks a fund, so their money goes into the default fund.
- Article inside Foliopeak: Do You Know What's in Your Pension?
- Deferred payment agreementApplies in England
- An arrangement to pay care home fees later from the value of your home.
- In plain English:You don't have to sell your home right away to pay for a care home. The council pays and gets the money back later, often when the home is sold.
MoreLess about Deferred payment agreement
The council places a legal charge on the home and pays care fees, which are repaid later from the sale. There may be set-up fees too.
You must meet conditions, such as having savings under a limit. Wales has a similar scheme, and Scotland's rules are different.
For example: Someone moves into a care home and doesn't want to sell their house straight away. The council covers fees under an agreement, repaid when the house sells after they die.
- DeFi (decentralised finance)
- Lending and trading crypto through computer code instead of a firm.
- In plain English:Short for decentralised finance. People lend, borrow and trade crypto using computer code, with no bank in the middle and little protection.
MoreLess about DeFi (decentralised finance)
DeFi stands for decentralised finance. It's built on smart contracts, so it can run without staff, but bugs or hacks can drain money.
Interest rates offered can be very high, which usually means very high risk.
For example: Someone puts coins into a DeFi lending pool paying 20% a year. A flaw in the code is used to drain the pool and the coins are gone.
- Deficit and national debt
- What the government borrows in a year, and the total it owes.
- In plain English:The deficit is how much more the government spends than it earns in tax in one year. The national debt is all its borrowing added up.
MoreLess about Deficit and national debt
Running a deficit adds to the debt. The debt is often shown as a share of the country's yearly output, GDP, to compare over time and between countries.
Paying interest on the debt is one of the government's biggest costs, so it rises when interest rates go up.
For example: If the government spends £1.2 trillion and collects £1.1 trillion in a year, the £100 billion gap is the deficit and is added to the national debt.
- Defined benefit and defined contribution
- A pension that promises an income, or a pot that depends on what goes in and how it grows.
- In plain English:A defined benefit pension promises you a set income, based on your pay and years worked. A defined contribution pension is a pot whose size depends on what's paid in and how it grows.
MoreLess about Defined benefit and defined contribution
With defined benefit, the employer takes the risk of investments doing badly. With defined contribution, you take that risk, and what you end up with depends on how much went in and how investments did.
Most private sector workplace pensions are now defined contribution. Public sector ones, such as for teachers and the NHS, are mostly still defined benefit.
For example: A teacher's pension pays a yearly income based on their pay and years worked. A retail worker's pension is a pot worth whatever it has grown to.
- Article inside Foliopeak: Pensions: SIPPs, Workplace Pensions, and SSAS
- Deflation
- Prices falling across the economy.
- In plain English:When prices across the economy fall. It sounds good, but people may put off buying, which can slow the economy down.
MoreLess about Deflation
It can sound good, but if people expect prices to fall, they put off buying, and businesses cut jobs and wages. It also makes debts harder to pay, as they stay the same while incomes fall.
Japan had long spells of mild deflation from the 1990s. Central banks try hard to avoid it.
For example: In a year with deflation, a car that cost £20,000 might cost £19,800 the next year, so some people wait to buy.
- Article inside Foliopeak: Inflation - the Quiet One
- Deleveraging
- Cutting back on borrowing by paying debts down or selling things.
- In plain English:Someone who borrowed a lot decides to owe less, so they pay debts off or sell things to raise the money.
MoreLess about Deleveraging
For one household it is usually sensible. The trouble comes when banks and firms all do it together, because they spend less, lend less and sell at the same time.
For example: After 2008, many banks cut lending and sold investments to rely less on borrowed money, which made loans harder to get for years.
- Article inside Foliopeak: Systemic Risk
- Delisting
- When a company's shares stop being traded on a stock exchange.
- In plain English:The company's shares come off the stock market. You may still own them, but they can be very hard to sell.
MoreLess about Delisting
After a takeover, shareholders are usually paid for their shares first, so it isn't always bad news.
If a company is removed because it's in trouble, its shares may be worth little or nothing.
For example: A small company leaves AIM to save costs. Its shareholders still own their shares but can only sell them privately, if at all.
- Demo account
- A practice trading account that uses pretend money.
- In plain English:You trade with pretend money to learn how a platform works. Nothing is at risk, but real trading feels very different.
MoreLess about Demo account
Doing well with pretend money doesn't mean you'll do well with real money, because fear and excitement change how people trade.
Some firms use demo accounts to draw people into risky products like CFDs, where most people lose money.
For example: Someone tries a demo account for a month and makes a pretend profit. With real money, they sell in a panic the first time a trade goes against them.
- Article inside Foliopeak: Trading vs Investing
- Deposit (home buying)
- The part of a home's price you pay from your own money.
- In plain English:The part of a home's price you pay yourself. The mortgage covers the rest. A bigger deposit usually gets you a lower interest rate.
MoreLess about Deposit (home buying)
Lenders' best rates usually start at loan to value levels such as 60%, 75% or 90%. Saving a little more to reach the next level can cut the rate.
Help with a deposit can come from family as a gift, which the lender will want confirmed in writing.
For example: A 10% deposit on a £250,000 home is £25,000, so you borrow the other £225,000.
- Article inside Foliopeak: Fixes, Trackers, and What Overpaying Really Does
- Depositary receipts
- Certificates that let a foreign company's shares trade on another stock market.
- In plain English:Certificates that let a company from one country have its shares traded on another country's stock market.
MoreLess about Depositary receipts
They let investors buy foreign shares in their own currency and on their own exchange. Each receipt can stand for one share or several.
Holders usually get dividends, minus any fees, but may have fewer voting rights than shareholders.
For example: A UK investor buys ADRs of a Taiwanese chip maker in New York, paying in dollars instead of buying shares in Taiwan.
- Article inside Foliopeak: Types of Shares: Ordinary, Preference, and A, B and C Shares
- Depreciation
- Spreading the cost of equipment over the years a business uses it.
- In plain English:When a business buys something that will last years, like a van, it spreads the cost over those years in its accounts, rather than all at once.
MoreLess about Depreciation
The yearly charge makes profits look smaller in the accounts but isn't money going out. For tax, HMRC adds it back and gives capital allowances instead.
Things wear out or go out of date at different speeds, so businesses choose how many years to spread the cost over.
For example: A business buys a £30,000 van it expects to use for five years and shows £6,000 of depreciation each year.
- Article inside Foliopeak: Depreciation and Capital Allowances: How Equipment Comes Off Your Tax
- Depression (economic)
- A very deep and long recession.
- In plain English:When the economy shrinks a lot for a long time, with many people losing jobs. It's much worse than a normal recession.
MoreLess about Depression (economic)
There's no fixed definition, but it means falls far bigger and longer than a usual recession.
In the Great Depression, world trade collapsed and unemployment in some countries reached a quarter of workers. Today's governments and central banks act faster to try to stop it happening again.
For example: In the early 1930s output in the US fell by about a quarter and millions of people lost their jobs.
- See also: Recession
- Deprivation of assetsUK
- Giving money away to avoid care fees, which the council can still count as yours.
- In plain English:If you give away money or your home to avoid paying for care, the council can still treat it as yours when working out what you pay.
MoreLess about Deprivation of assets
There's no time limit on how far back a council can look, but it has to show that avoiding care fees was a main reason at the time.
Normal spending, such as paying off debts or buying what you need, isn't usually a problem. Gifts made long before any need for care are less likely to be questioned.
For example: Someone moves into a care home a month after giving their house to their children. The council treats the house as still theirs when working out fees.
- Article inside Foliopeak: Paying for Care: The Means Test, the Home and What the NHS Pays
- DeputyshipApplies in England, Wales
- When a court appoints someone to make decisions for a person who can no longer make them.
- In plain English:If someone can no longer make decisions and didn't set up a power of attorney, a court can choose someone to make decisions for them.
MoreLess about Deputyship
There are two kinds: one for property and money, and one for health and welfare, though health and welfare deputies are rarer. A deputy must send a yearly report.
Applying takes months, and there are fees and often a yearly supervision charge.
For example: A man has a stroke with no lasting power of attorney. His daughter applies to be his deputy to manage his bank accounts, which takes several months.
- Derivatives
- Contracts whose value depends on something else, such as a share price.
- In plain English:Contracts whose value depends on the price of something else, like shares, oil or currencies. They can be used to reduce risk or to bet.
MoreLess about Derivatives
They can be used to reduce risk, such as an airline fixing its fuel price, or to bet on prices, often with borrowed money.
Many derivatives used by everyday investors are high risk, and most people trading them lose money.
For example: A farmer agrees a futures contract to sell wheat at a set price, so a fall in price at harvest won't hurt.
- Digital bank (app-only bank)
- A bank you use mainly through a phone app.
- In plain English:A bank you mainly use through an app on your phone, with no branches. UK digital banks are covered by the same savings protection.
MoreLess about Digital bank (app-only bank)
They often offer instant notifications, spending summaries and easy savings pots. Some started as e-money firms and later got a banking licence.
With an e-money firm, your money is kept separate but isn't covered by the FSCS if the firm fails.
For example: Someone checks a money app's website and sees it's a licensed bank, so their savings are protected like at any other bank.
- See also: E-money account
- Digital poundUK
- A possible digital form of cash from the Bank of England that has not been decided on.
- In plain English:The Bank of England is looking at making a digital version of cash. Nothing has been decided, and it may never happen.
MoreLess about Digital pound
The Bank of England and the Treasury have asked the public for views. Concerns raised include privacy and how it might affect banks.
If it went ahead, it's planned to have limits on how much each person could hold.
For example: A digital pound would work like a cash wallet on your phone, held with the Bank of England rather than a bank.
- Digital wallet
- An app that keeps your card on your phone so you can pay by tapping.
- In plain English:Apple Pay and Google Pay are digital wallets. Your card is stored on your phone, so you can pay by holding it near a card reader.
MoreLess about Digital wallet
The shop never sees your real card number, as a stand-in number is used. That makes it safer if the shop's systems are hacked.
Payments need your face, fingerprint or code, so a lost phone is harder to misuse than a lost card.
For example: Someone leaves their purse at home and pays for shopping with Google Wallet on their phone.
- Dilution
- When new shares are issued, so each existing share owns a smaller slice.
- In plain English:When a company makes new shares, each old share is now a smaller part of the company, so it gets a smaller slice of the profits.
MoreLess about Dilution
It's not always bad. If new money helps the company grow, a smaller share of a bigger company can be worth more.
Share options for staff and convertible bonds can also cause dilution when they're turned into shares.
For example: A founder owns 50% of a startup. It issues new shares to an investor equal to a quarter of the company, and the founder now owns 37.5%.
- Direct Debit and standing orderUK
- Two ways to pay regularly from your bank account.
- In plain English:With a Direct Debit, the company takes what you owe, even if the amount changes. With a standing order, you send a fixed amount yourself.
MoreLess about Direct Debit and standing order
Under the Direct Debit Guarantee, if a wrong amount is taken you get an immediate refund from your bank. You must be told in advance if the amount or date changes.
Standing orders suit things like paying rent or moving money to savings each month.
For example: An energy company takes a different amount each month by Direct Debit. Someone also pays £200 into savings every payday with a standing order.
- Article inside Foliopeak: How Money Moves: Faster Payments, Bacs and CHAPS
- Direct payments (social care)UK
- Money from the council to arrange your own care, instead of the council arranging it.
- In plain English:Instead of arranging your care for you, the council gives you money so you can choose and pay for your own care.
MoreLess about Direct payments (social care)
You can use them to hire a carer yourself, pay an agency or buy equipment, as agreed in your care plan. If you employ someone, you take on an employer's duties.
They're available in England, Scotland, Wales and Northern Ireland, though named differently in places.
For example: A disabled man uses direct payments to employ a carer he knows and trusts, at times that suit him.
- Article inside Foliopeak: Paying for Care: The Means Test, the Home and What the NHS Pays
- Director's loanUK
- Money a director borrows from, or lends to, their own company.
- In plain English:When a director takes money out of their company that isn't pay or a dividend, or puts their own money in. Owing the company can bring extra tax.
MoreLess about Director's loan
If a director owes the company and doesn't repay within nine months of the year end, the company pays a temporary tax charge on it (section 455), returned once the loan is repaid.
Loans over a certain size can count as a taxable benefit for the director, and the company may have to report it. It's tracked in a directors' loan account.
Taking money out regularly without a plan can lead to a large loan that has to be cleared with a dividend or salary, which is taxed.
For example: A director takes £10,000 from the company to cover a home repair and repays it before the deadline, so no extra tax charge applies.
- Article inside Foliopeak: Director's Loans: When You Owe the Company, or It Owes You
- Disability Living Allowance (DLA)Applies in England, Wales, Northern Ireland
- Money towards the extra costs of a disabled child.
- In plain English:Money for parents of disabled children under sixteen, to help with the extra costs of care or getting around.
MoreLess about Disability Living Allowance (DLA)
It has a care part and a mobility part, each paid at different rates depending on needs. It can also unlock other help, such as a carer's benefit for a parent.
At 16, a child usually moves to Personal Independence Payment.
For example: The parents of a seven-year-old with autism who needs a lot of extra care claim Disability Living Allowance for them.
- Disabled Students' AllowanceUK
- Extra help with study costs for disabled students, which doesn't have to be paid back.
- In plain English:Extra money for disabled students to cover study costs like equipment or a note-taker. You don't pay it back.
MoreLess about Disabled Students' Allowance
You apply through your student finance body, and there's usually an assessment of what you need. You don't need to wait until you start the course.
It's paid on top of the usual student loan and doesn't add to what you owe.
For example: A student with dyslexia gets software and a laptop paid for, plus some one-to-one study skills sessions.
- Article inside Foliopeak: Student Finance in England: What a New Student Borrows, and What They Repay
- Discounted cash flow (DCF)
- Valuing something by estimating its future cash and working out what that's worth today.
- In plain English:You guess how much cash something will make in the future, then work out what that's worth in today's money, since money later is worth less than money now.
MoreLess about Discounted cash flow (DCF)
Money in the future is worth less than money now, partly because of inflation and partly because you could invest it meanwhile. The rate used to shrink it is called the discount rate.
It's widely used by analysts and in business deals. Its answer is only as good as its guesses about growth and risk.
For example: A company is expected to bring in £1 million a year for ten years. With a higher discount rate, analysts value it at less.
- Discretionary Housing PaymentUK
- Extra short-term help with rent from the council.
- In plain English:If your benefits don't cover your rent, your council may give you extra money for a short time. You have to apply.
MoreLess about Discretionary Housing Payment
It's not a benefit you're entitled to, so the council decides who gets it and how much, from a fixed pot. It can cover a rent shortfall, a deposit or moving costs.
You usually apply on a form from your council, explaining why you need help.
For example: Someone's housing help is cut after a child leaves home. The council pays the gap for six months while they find a smaller home.
- Discretionary management
- Letting a professional make the day-to-day choices for your investments.
- In plain English:You hand your investments to a professional who decides what to buy and sell for you. It usually costs more than doing it yourself.
MoreLess about Discretionary management
The manager can buy and sell without asking you each time. A minimum amount to invest is common, often tens of thousands of pounds.
Yearly fees and fund costs together can be well over 1%, which adds up over time. You still get regular reports.
For example: Someone with £300,000 hands it to a discretionary manager to run within a medium-risk approach they agreed.
- Discretionary trust
- A trust where the trustees decide who gets what and when.
- In plain English:Money is put in a trust, and the trustees decide which family members get money, how much and when.
MoreLess about Discretionary trust
It's often used when the people to benefit are young or might need protecting, such as from divorce or debts. Trustees must follow the trust's rules.
Tax rules are complex, with charges at set points and higher income tax rates in the trust.
For example: Grandparents put money into a discretionary trust for all their grandchildren. The trustees later use it to help one with university costs.
- Article inside Foliopeak: Trusts in Plain English
- Disinflation
- Inflation slowing down, while prices still rise.
- In plain English:When prices are still rising, but more slowly than before. Prices aren't falling, they're just going up less fast.
MoreLess about Disinflation
It's what central banks aim for when inflation is too high. Prices rarely fall back to where they were; they just stop rising so fast.
That's why bills can still feel high even when the news says inflation has dropped.
For example: Inflation falls from 10% to 4% over a year. Prices are still going up, just more slowly.
- See also: Deflation
- Disposable income
- What is left of your income after tax.
- In plain English:The money you have left after tax and National Insurance, to spend or save.
MoreLess about Disposable income
It's different from discretionary income, which is what's left after both tax and essential bills.
Governments use average disposable income to see how well-off households are, and how that changes over time.
For example: Someone earning £2,500 a month before tax takes home £2,050. After rent and bills of £1,300, they have £750 left to spend or save.
- Disposal
- Selling or giving away something, which can bring a tax bill on any gain.
- In plain English:Selling, giving away or swapping something you own. For tax, this can mean you owe Capital Gains Tax on any rise in value.
MoreLess about Disposal
It includes things like an asset being destroyed or lost if you get insurance money for it. Each disposal's gain or loss is worked out separately.
Death isn't a disposal, so there's no Capital Gains Tax then, though Inheritance Tax may apply.
For example: Someone gives shares worth £20,000 to their brother. It's a disposal at that value, even though no money was paid.
- Article inside Foliopeak: Capital Gains & Dividend Allowances
- Disposition effect
- Selling winners too soon and holding losers too long.
- In plain English:Selling a share that's gone up feels good, and selling one that's fallen feels like admitting a mistake. So people keep the losers and sell the winners.
MoreLess about Disposition effect
It comes from loss aversion: a loss hurts more than the same-sized gain feels good.
Asking whether you'd buy an investment today, at today's price, helps take the price you paid out of the decision.
For example: Someone sells a share that rose by a fifth to bank the gain, but keeps one that has halved, waiting to get back to what they paid.
- Article inside Foliopeak: Trading vs Investing
- Diversification
- Spreading your money around so one bad investment hurts less.
- In plain English:Not putting all your eggs in one basket. Owning lots of different investments means one going badly doesn't sink everything.
MoreLess about Diversification
It can be across companies, countries, industries and types of asset like shares, bonds and property. It reduces risk but doesn't remove it, as whole markets can still fall.
A global index fund is one simple way to spread money across thousands of companies.
For example: A global index fund spreads your money across thousands of companies, so one of them failing barely moves it.
- Article inside Foliopeak: Diversification and Rebalancing, Briefly
- Dividend
- A share of a company's profit paid to its shareholders.
- In plain English:When a company makes a profit, it may pay some of it to the people who own its shares. That payment is a dividend.
MoreLess about Dividend
Companies usually pay them twice a year or every quarter. Your platform pays them into your account, and you can choose to take the cash or reinvest it.
Dividends inside an ISA or pension are tax-free. Outside, they count towards the dividend allowance.
For example: A company pays 10p a share, so holding 1,000 shares gets you £100.
- Article inside Foliopeak: Stocks, Shares and Equities
- Dividend allowanceUK
- The dividends you can receive each year before tax is due.
- In plain English:Each year, you can get a small amount of dividends without paying tax. Dividends in an ISA or pension don't count.
MoreLess about Dividend allowance
Dividends up to £500 a year are taxed at 0%. Above that, the rate depends on your income tax band.
It doesn't add to your other income limits. The dividends still count when working out which tax band your other income falls in.
A shareholder in their own limited company often takes dividends, so the allowance matters for them too.
For example: Get £1,500 of dividends outside an ISA and the first £500 is tax-free; tax is due on the other £1,000.
Figures checked 11 November 2026. Source: gov.uk (opens in a new tab)
- Article inside Foliopeak: Capital Gains & Dividend Allowances
- Dividend aristocrats
- Companies that have raised their dividend every year for many years.
- In plain English:Companies that have raised their dividend every single year for a long time, often twenty-five years or more.
MoreLess about Dividend aristocrats
In the US it usually means 25 or more years of rises in a row.
In the UK there's no official list, but some indexes track similar companies. Funds that hold them aim for steady, rising income.
A company can drop off the list if it has a hard year, as some did in 2020.
For example: A US consumer goods company has raised its dividend every year for over 60 years.
- See also: Dividend yield
- Dividend cover
- How many times a company's profit could pay its dividend.
- In plain English:A company's profit divided by the dividends it pays. If it's above two, the dividend looks well covered. Below one, it's paying out more than it earns.
MoreLess about Dividend cover
A cover of 2 means profits were twice the dividend. Below 1 means the company paid out more than it earned.
Higher cover means the dividend is more likely to keep being paid if profits fall. It's the opposite way round from the payout ratio.
One-off profits or losses can make it look better or worse than it really is, so it's worth checking a few years.
For example: A company earns £4 a share and pays £2 in dividends. Its dividend cover is 2.
- Article inside Foliopeak: Stocks, Shares and Equities
- Dividend payout ratio
- The share of a company's profit paid out as dividends.
- In plain English:How much of its profit a company pays to shareholders. A very high share may be hard to keep up if profits fall.
MoreLess about Dividend payout ratio
One near or over 100% means the dividend may not last.
Growing companies often pay out little or nothing, using profits to expand. Mature companies may pay out more.
It can be worked out from profits or from cash, and cash often gives a truer picture.
For example: A company earns £100 million and pays £60 million in dividends. Its payout ratio is 60%.
- See also: Dividend cover
- Dividend reinvestment
- Using dividends to buy more of the same investment.
- In plain English:Instead of taking dividends as cash, you use them to buy more shares or fund units, so your investment grows faster.
MoreLess about Dividend reinvestment
Reinvested dividends buy more shares, which then pay their own dividends, so growth builds on itself over time.
Some funds come in an accumulation version that reinvests inside the fund automatically.
For example: Someone holds shares in a general investment account and reinvests £800 of dividends. That £800 still counts towards their dividend tax that year.
- Article inside Foliopeak: Income vs Accumulation Units
- Dividend taxUK
- Tax on dividends above your yearly allowance.
- In plain English:If you get more dividends than your yearly tax-free amount, you pay tax on the rest. The rate depends on your tax band.
MoreLess about Dividend tax
The rates are 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band.
It's paid through Self Assessment, or sometimes through your tax code if the amount is small. Dividends are taxed after your other income, which can push them into a higher band.
Company directors who pay themselves in dividends need to plan for the bill.
For example: Get £2,500 of dividends outside an ISA: the first £500 is tax-free, and a basic-rate taxpayer pays 10.75% on the other £2,000, which is £215.
Figures checked 11 November 2026. Source: gov.uk (opens in a new tab)
- Article inside Foliopeak: Capital Gains & Dividend Allowances
- Dividend voucherUK
- A record of a dividend a company has paid you.
- In plain English:A piece of paper or record that shows a company paid you a dividend, how much and when. You need it for your tax records.
MoreLess about Dividend voucher
It's important for keeping records and for proving to HMRC that a dividend was properly paid. Board minutes approving it are usually kept too.
Paying a dividend without enough kept profit can make it illegal, and shareholders may have to pay it back.
For example: A director pays themselves a dividend from their company and writes a voucher with the date, the amount and their name, keeping a copy with the board minutes.
- Dividend waiverUK
- When a shareholder formally gives up a dividend so others get more.
- In plain English:A shareholder formally says no to a dividend, so it's shared among the other shareholders instead. HMRC looks closely at these.
MoreLess about Dividend waiver
It must be set up before the dividend is declared. HMRC looks closely at waivers in family companies.
Different classes of shares, each with their own dividends, are a more common way to share out profits.
For example: A husband waives his dividend so all of it goes to his wife, who pays less tax. HMRC may treat the money as his income anyway.
- Article inside Foliopeak: Salary vs Dividends for Company Directors
- Dividend yield
- A year's dividends compared with the share price.
- In plain English:A year's dividends divided by the share price. A high yield can be good, or a sign the share price has fallen because of trouble.
MoreLess about Dividend yield
It's based on past dividends, which may not be repeated. A share price falling because the company is in trouble can make the yield look high just before a cut.
Comparing yields with savings interest rates is common, but dividends aren't guaranteed.
For example: A share costing £10 that pays 40p a year in dividends has a yield of 4%.
- Domestic ratesApplies in Northern Ireland
- Northern Ireland's tax on homes in place of Council Tax.
- In plain English:In Northern Ireland, homes pay rates instead of Council Tax. The bill is based on what your home is worth.
MoreLess about Domestic rates
The bill is the home's capital value times a regional rate set by the council and a regional rate set by the government. There's a cap for very high-value homes.
Help can include a rate rebate for people on a low income and relief for some disabled people.
For example: A homeowner in Belfast gets a yearly rates bill instead of Council Tax, worked out from their house's value.
- Dormant accountsUK
- Bank accounts nobody has used for years, whose money you can still claim back.
- In plain English:Bank and savings accounts that haven't been used for many years. The money is still yours, and you can claim it back.
MoreLess about Dormant accounts
An account counts as dormant after 15 years with no use. You can trace lost accounts with the free My Lost Account service.
The Reclaim Fund keeps enough back to pay people who come forward, and the rest goes to good causes. Shares, insurance and pensions can be included too under newer rules.
Lost accounts are more common after moving home or a death in the family.
For example: Someone uses My Lost Account and finds a savings account their late father opened 20 years ago, with £1,200 in it.
- Dormant companyUK
- A company that exists but isn't trading.
- In plain English:A company that's registered but isn't doing any business. It still has to send some forms to Companies House.
MoreLess about Dormant company
Small dormant companies can file simpler accounts and may not need an audit. You must tell HMRC that it's dormant for Corporation Tax.
A company that's paying even small bank charges may still count as dormant.
For example: Someone registers a company name for a future business and keeps it dormant until they're ready, filing simple accounts each year.
- Double taxation agreement
- A deal between two countries so the same income isn't taxed twice.
- In plain English:If you earn money in one country and live in another, these deals between countries stop you paying full tax twice on the same income.
MoreLess about Double taxation agreement
Often the country where the income comes from taxes it first, and the other country gives credit for that tax.
Forms may need to be filled in to get the lower rate the treaty allows, such as the W-8BEN form for US shares.
For example: A UK investor fills in a W-8BEN, so US tax taken from their dividends is cut under the UK and US agreement.
- Article inside Foliopeak: Money Abroad Isn't Automatically Outside UK Tax
- Dow Jones Industrial Average
- An index of thirty large US companies, quoted on the news every day.
- In plain English:A list of thirty big American companies whose share prices are added up to show how the US stock market is doing.
MoreLess about Dow Jones Industrial Average
It's made of 30 large US companies.
Because it uses share price, a company with a high-priced share moves the index more than a larger company with a lower share price.
It started in 1896 with 12 companies. Members change over time, as companies grow or shrink.
For example: A big rise in a high-priced share can push the Dow up even on a day when most of its other companies fall.
- See also: S&P 500
- Downsizing additionUK
- Keeps some Inheritance Tax help on a home you sold or moved out of.
- In plain English:If you sold your home or moved somewhere cheaper, your family can still get some of the extra Inheritance Tax-free allowance for homes.
MoreLess about Downsizing addition
It's claimed by whoever deals with the estate, on the Inheritance Tax forms. You need to show when the home was sold or given away and what it was worth.
It means people don't lose out by moving to a smaller home or into care before they die.
For example: A widow sells her family home and moves to a small flat, leaving her estate to her sons. Her estate can still get most of the residence nil-rate band.
- See also: Residence nil-rate band
- Drawdown (investments)
- How far an investment has fallen from its highest point.
- In plain English:How much an investment has dropped from its highest point to its lowest after that. It shows how bad the fall was.
MoreLess about Drawdown (investments)
It shows how bumpy the ride has been, which a yearly return can hide. Funds often show their maximum drawdown in their factsheets.
A fall needs a bigger rise to get back: a 50% fall needs a 100% rise to recover.
For example: A fund rises to £10,000, falls to £7,000 and later recovers. Its drawdown was 30%.
- Drawdown (pensions)
- Taking money from your pension pot as you need it while the rest stays invested.
- In plain English:You leave your pension invested and take money out when you need it. Your income isn't guaranteed, so it can run out if you take too much.
MoreLess about Drawdown (pensions)
You choose how much income to take and when, and can change it. Each withdrawal above the tax-free part is taxed as income.
Taking too much early, or big market falls, can leave too little for later years. Some people combine drawdown with an annuity for a steady base.
For example: You leave £200,000 invested and take out £8,000 a year, changing the amount as you go.
- Article inside Foliopeak: Drawdown vs Annuity, in Plain English
- Dual listing
- A company's shares being traded on two stock exchanges.
- In plain English:When a company's shares can be bought and sold on two different stock exchanges, such as London and New York.
MoreLess about Dual listing
Companies do it to reach more investors or because they have roots in two countries. Some have two separate companies with shared ownership.
If you can choose, buying in your own currency and market can save on currency fees.
For example: A mining company's shares trade in London and Sydney. A UK investor buys them in London in pounds.
- See also: London Stock Exchange (LSE)
- Due diligence
- The checks done before a deal to make sure it is what it seems.
- In plain English:Checking everything carefully before you buy, invest or sign a deal, so there are no nasty surprises.
MoreLess about Due diligence
It's often done by lawyers and accountants for a buyer. Problems found can lower the price or end the deal.
For everyday investors it means checking a firm is on the FCA register, reading the key documents and understanding the fees and risks.
For example: A buyer's accountants find a company owes far more tax than it admitted, so the buyer cuts its offer.
- Duration
- How sensitive a bond's price is to changes in interest rates.
- In plain English:A measure of how much a bond's price will move when interest rates change. The longer the duration, the bigger the swing.
MoreLess about Duration
As a rough guide, a bond fund with a duration of 10 years falls about 10% if interest rates rise by one percentage point.
Short duration bonds and funds move less when interest rates change. Long ones move more, both up and down.
For example: In 2022 long-dated gilt funds with durations near 20 years fell by about a third as rates rose.
- Article inside Foliopeak: Bonds
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