If you’re looking to invest in a company, there are several options available to you. The most commonly chosen options are stocks or bonds. Convertible bonds, while being bonds by name, are actually something in between the two types of investment. Basically, convertible bonds can be changed from bonds into stock by the investor. Depending on the financial situation of the company, and the type of convertible bond that you own, it is also possible that the company can force the bond to be turned into stock.
Convertibles are different from regular bonds in terms of risk and payout. If you’re looking for a bond that will be relatively safe, then you should definitely go with a regular bond. While it is unlikely that you will lose all of your money through convertible bonds, it is still more possible that this could happen than if you were holding regular bonds. The reason for this is that the company may be able to force you to take stock instead of bonds. In most cases, however, there is a minimum return to your investment that you will be guaranteed.
The benefit of buying convertible bonds is that you have the option of converting your investment to stock in the company that you have chosen. The reason that this is an advantage is simply that you will have almost as much safety as if you had purchased a regular bond, but you will have the option of getting more money out of your investment if the stock begins to go quite a bit higher than your bond.
It is important to make sure that you understand all of the terms that relate to your particular convertible bonds before you buy them. The reason for this is that every company will have a slightly different policy – including different conversion rates.
However, if you are looking for a good way to invest in new companies that are a bit of a risk, then convertible bonds might be for you. These bonds offer higher possible returns than regular bonds, and are much safer than normal stock.