Should You Own Convertible Bonds?

Should You Own Convertible Bonds?

I do not recommend that the average investor buy convertible bonds. Sometimes investors are attracted to this medium because they can borrow heavily and leverage their commitment. This simply increases your risk. Excessive leverage can be dangerous.

The theory goes that a convertible bond will almost rise as fast as the common stock rises, but the convertible bond will decline less during downturns. As it goes with most theories, the reality may be quite different.  There is also a liquidity question to consider, since many convertible bond markets may dry up in extremely difficult periods.

"I'm A Long-Term Investor; I'm Not Worried; I'm Still Getting My Dividends"

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"I'm A Long-Term Investor; I'm Not Worried; I'm Still Getting My Dividends"

Another risky statement is to say to yourself, "I'm not worried about my stocks being down because they are good stocks, and I'm still getting my dividends." This is naive because good stocks can go down as much as opinion that they are good stocks.

Furthermore, if your stocks are down 25% in value, isn't it rather absurd to say you're all right because you are getting a 4% yield? A 25% loss plus a 4% income gain makes a big fat 21% net loss.

If you aspire to be a successful investor, you must face facts—most of the reactions you have about taking losses are rationalizations, because no one wants to take losses. You have to do many things you don't want to do to increase your chances of success in the stock market. You must develop exact rules and tough-minded selling disciplines.

Shanghai composites rolled 3.45%

Asian stock markets today is a declining trend. Hong Kong's hang Seng Index opened this morning with the decline. For sometime in the early hours of trading on the green marks gone. But based on the marks could not remain. It then went on to red marks. The index declined in the last hour of trading has increased. 1.53% of the 348 points after the index closed at 22.423 with weakness. China's Shanghai index composites with 115 points to 3223 on the 3.45% was the weakness. Japan's Nikkei index 1.01%, South Korea Cospi index of 0.78%, Strait Times Index 0.64% and 0.38% of Indonesia's Jakarta composites came weakness. Meanwhile, Taiwan's Taiwan light speed Veted index was 0.36%.