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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:

  1. Convertible bonds offer regular interest payments, like regular bonds.

  1. Downturns in this investment category have not been as dramatic as in other investment categories.

  1. 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.

  1. 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.

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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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