Convert to Defense in a Down Market
This column was originally published on RealMoney on June 8 at 11:16 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
I had thought 2006 might be a slight down year for U.S. stocks, but the recent downdraft has made me start to think about what to buy if the selling persists.
Convertible bonds have appeal in this environment. These are corporate bonds that can be converted into shares of common stock.
Convertible bonds tend to trade more like stocks in an up market as the underlying stock moves closer to the set conversion price for the bonds; conversely, they trade more like plain-vanilla bonds in a down market as they move away from the conversion price.Closed-end funds specializing in convertible bonds have a number of merits over buying individual issues: They have better liquidity, there is no single-issuer risk, and there is less trading slippage. One closed-end fund I have
|Head to Head on NAV|
|Head to Head on Market Price|
It's always been my opinion that it pays to have more -- not fewer -- expert market views and analyses when you're making investing or trading decisions. That's why I recommend you take advantage of our free trial offer to TheStreet.com's RealMoney premium Web site, where you'll get in-depth commentary and money-making strategies from over 50 Wall Street pros, including Jim Cramer. Take my advice -- try it now.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV