Take a few bumps out of investing with a convertible fund.
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Convertibles come in a couple of flavors: the cool, four-wheeled kind that cruise the open road, and the stock-and-bond type. It's the latter we're concerned with here, and while they're perhaps not as fashionable as the Mercedes Benz SLK 320, they're potentially more rewarding.
"In their most basic form, convertible securities are either bonds or preferred stock that may be converted into the underlying common stock at any time," explains Ed Perks, portfolio manager of the Franklin Convertible Securities Fund. Although most don't get converted, over the long term, convertibles have delivered returns approaching those of the S&P 500 but with lower risk-two quite appealing words to investors at the moment.
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