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Upside potential with convertible bonds
Online Stock Market Trading Convertible bonds are bonds issued by corporations that are
backed by the corporations'
assets. In case of default, the bondholders have a legal claim
on those assets. Convertible bonds are unique from other bonds
or debt instruments because they give the holder of the bond the
right, but not the obligation, to convert the bond into a
predetermined number of shares of the issuing company.
Therefore, the bonds combine the features of a bond with an
"equity kicker" - if the stock price of the firm goes up the
bondholder makes a lot of money (more than a traditional
bondholder). If the stock price stays the same or declines, they
receive interest payments and their principal payment, unlike
the stock investor who lost money.
Why are convertible bonds worth considering? Convertible bonds
have the potential for higher rates while providing investors with
income on a regular basis. Consider the following:
- Convertible bonds offer regular interest payments, like regular bonds.
- Downturns in this investment category have not been as dramatic as in other investment categories.
- If the bond's underlying stock does decline in value, the minimum value of your investment will be equal to the value of a high yield bond. In short, the downside risk is a lot less than investing in the common stock directly. However, investors who purchase after a significant price appreciation should realize that the bond is "trading-off-the-common" which means they are no longer valued like a bond but rather like a stock. Therefore, the price could fluctuate significantly. The value of the bond is derived from the value of the underlying stock, and thus a decline in the value of the stock will also cause the bond to decline in value until it hits a floor that is the value of a traditional bond without the conversion.
- If the value of the underlying stock increases, bond investors can convert their bond holdings into stock and participate in the growth of the company.
3 minute walk to the nearest metro station (bond street) 2 km to the nearest station ( charing cross) 3 minute walk to the nearest bus stop 5 km to the nearest fair site (earls court) The lobby is medium sized and has wood panelled walls, a pastel colour scheme and a small seating area, with more seating in the adjoining bar area. The restaurant is located on the lower ground floor. It's decoration is influenced by both the oriental and Art Deco. It is a traditional Victorian hotel in grey stone with flags over the entrance. The rooms and bathrooms are in very good condition, with bright cheerful colour schemes and dark wood furniture. The hotel is centrally located on a busy side street in the West End, just five minutes walk from Oxford Street, some of London's best shopping areas and Bond Street underground station. This is a good standard hotel in an ideal location. ( 07LP) (c) Octopustravel.com Ltd 2006
Stock Investing Course During the past five years, convertible bonds have generated
superior returns compared to more conservative bonds. Convertible
bonds have generated higher returns because many companies have
improved their
financial
performance and have their
stocks appreciate in value.
The walls arches and slit windows recall medieval castles that he visited on childhood holidays and inside the walls are cobbled paths and other intricate details. While Mr Revington and his family think his building adds to their street, some neighbours think it might detract from the potential value of their homes. so beware.
Stock Market Game Convertible bonds can play an important role in a
well-diversified investment portfolio for both conservative and
aggressive investors. Many mutual funds will invest a portion
of their investments in convertible bonds, but no fund invests
solely in convertible bonds. Investors who want to invest directly
could consider a convertible bond from some of the largest
companies in the world.
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Stock Investing Game About the author: Tony Reed is the author of "
Upside potential with convertible bonds",
please visit his website
Bonds trading & Bonds market for more
information.
This is a pleasant hotel, situated in the heart of London. (0107PH) It is a modern red brick building. The hotel is situated in a quiet side street just a few minutes walk from Oxford Street, Regent Street and Bond Street and adjacent to the famous Charlotte Street which is renowned for its vast choice of restaurants. Return to top
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