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Convertible Bonds
"Surprisingly, over long periods, convertibles typically provide a
better total return than stocks."
--The Value Line Guide to Convertibles Strategies
Not a novel concept on Wall Street, convertible bonds are the sleeper investments of the past few decades. They are one of the primary investment vehicles used by Wellesley Investment Advisors in pursuing our strategy of Limited Risk Investing.
Convertible bonds have many similarities to other debt instruments. Typically, they are issued by corporations and have maturity dates. Many pay interest. Most are rated by bond agencies and carry default and interest rate risk inherent in all debt instruments. However, convertible bonds have a special feature - they are convertible (at the holder's option) into a predetermined number of shares of the issuing corporation's common stock. Convertible bondholders are creditors of the company, with the option of becoming owners.
This conversion feature can be very valuable to investors. Convertible bonds almost always rise more than they fall in response to an equivalent move in the price of the underlying company's common stock.
Benefits of Holding Convertible Bonds in Your Portfolio
Most convertible bonds have a unique value proposition: infinite upside potential due to the equity component, and limited downside risk due to the debt classification and characteristics. Issued by a variety of corporations, convertibles offer risk-conscious investors a chance to participate in the far riskier stock market.
Financial Advisors Have A Tough Job.
Whether you're doing it all under one roof, or working with a team of independent professionals, your clients' expectations are clear: take care of me.
In today's volatile markets, you may wonder if allocating a significant number of client portfolios to stocks is too risky. Yet, keeping clients in munis or treasuries may not be the answer, either. So, where can advisors turn to protect and grow their clients' wealth?
If you're not 100% certain that you're doing all that you can to help your clients protect and grow their wealth, perhaps we can help. Since 1991 we've helped our clients achieve their objectives through both bull and bear markets, investing in convertible bonds in an absolute return strategy.
We can help you accomplish the same, through a turnkey approach designed to increase client satisfaction, retention-and your revenues.
For more information, call us at 781-416-4000, or e-mail us at info@wia.cc, to arrange for a confidential discussion about how investing in convertible bonds in an absolute return strategy can add value to your practice.
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