Convertible

Convertible is any security which contains an option for the holderto convert it into another form ofsecurityat a fixed price at some stage. Convertibles are often bonds or loan stock but sometimespreferenceshares which carry the right to be converted into ordinary shares at some date in the future at a previously specified price.

Convertibles are sometimes regarded as a half way house between investing in shares and investing in as they draw characteristics from both.They usually provide a greater income than shares but less income than a corporate bond .

Holders of convertibles rank above ordinary shareholders in the pecking order in the event of the issuer the company going into liquidation. In fact in such circumstances holders of convertibles have a call on the assets of the business immediately after secured creditors. Convertibles like shares and gilts are traded on the stockmarket. You may invest in convertibles via an ISA .

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2009-02-17 00:00:00 © Moneyextra.com