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A financial instrument, traded on or off an exchange, the price of which is directly dependent upon, or  "derived from", the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed-upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates). Derivatives involve the trading of rights or obligations based on the underlying product, but do not directly transfer property. They are used to hedge risk or to exchange a floating rate of return for fixed rate of return.

discretionary account (managed account)
An investment vehicle in which investors give a manager or broker authority to buy and sell securities, futures or other assets on behalf of the investor, sometimes with, sometimes without, restrictions.

distressed securities investment strategy
The purchase of deeply discounted securities issued by troubled or bankrupt companies, or short-selling the stocks of those firms.

The practice of holding several different types of investments simultaneously. For example, investing in a small company stock fund, a large company stock fund and an international fund, as well as investing in funds that pursue different investment approaches, such as growth stock funds and value stock funds. By investing in a range of different investments, overall risk is reduced. That's because different types of investments are unlikely to all move in the same direction at the same time.

The peak-to-trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peaks to the trough. In other words, a drawdown is from the time a retrenchment begins to when a new high is reached, as the shape of the valley is unknown until the new peak is reached.


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