What is convertible bond and how to invest in it

Do you want to double the savings? The best option is to invest in the financial market. There are many ways to expand your investment portfolio. Like investing in the stock market or prize bonds. There is a combination of these two called convertible bonds. It provides you two in one benefit it works like a bond but you can use it in a stock market and get double your investments.

But you first need to understand how it works for you and how it benefits you as it’s a bit complicated than the normal bonds. It has its cons and pros but presently just concentrate on the benefits it can get you.

Convertible bonds

Convertible bonds have both the features of the stock market and prize bond. It’s a shared bond where you can convert it into common shares of company stock. You get both the benefits of a single investment. Now why companies do issue these kinds of bonds? The reason is pretty clear, companies need money from their investors. It benefits them rather than going for a loan or debt. It is less costly than other procedures.

Investing in convertible bonds

Usually, other bonds don’t have a maturity date; they can be issued any time you want. Inconvertible bonds the maturity date is fixed along with coupon rates. Each bond has its conversion option which makes it different from the other prize bonds. It has the ratio of shares the bond can be converted into. It’s a guaranteed income for those who use them smartly. It has higher potentials then the normal bonds the risk factor is always high in such dealings but your mind and luck can get you rich in no time.

convertible bonds
convertible bonds


These bonds are less common than the other bonds which makes it trickier. You need to dig deep while searching for these bonds as not all the companies issue them. You need to know about the company’s background as well as their fees. You might not be offered as direct investment as they are complicated than other bonds.

Financial advisor

It is almost mandatory to have a financial advisor. As you are not aware of all the markets and companies that provide convertible bonds. As they are complicated only an expert can give you accurate advice and you can get your lucky bond. You can also get them by those funds that hold these bonds like mutual funds or exchange-traded funds.

Few more tips

Whether convertible bond or prize bond, in both the case you should know about the interest rate risk. Shorter or longer maturities are more appropriate.

Find a local advisor they can get you on the right market and right company stock.

Do homework about the individual bond and bond funds. Bond funds offer different bond types of collection in a single investment.

You can grow your portfolio by these bonds, but not in every case they can be beneficial. Understand the mechanic of working on these bonds and act accordingly.

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