Are convertible bonds attractive for individual investors? Whats the best way to invest in them?
Convertible bonds took a drubbing last year. These investments—which pay a yield like a bond but can be converted into shares of a company at a certain stock price—tumbled by 30% or more in 2008 as hedge funds, dominant players in this area in recent years, dumped investments to raise cash. Lately, though, investors have been sniffing out bargains, attracted by an investment that pays a yield but also enables investors to profit if stocks keep rising. Convertible bonds have climbed more than 40% this year. Mr. Tuttle recommends an exchange-traded fund, the SPDR Barclays Capital Convertible Bond ETF, that tracks the returns of U.S. convertible bonds with outstanding issue sizes greater than $500 million. It’s up more than 12% over the past three months and has an expense ratio of 0.40%. He also likes the Calamos Convertible fund, up 8% over the past three months, and the Greenspring Fund, which is 50% in value stocks and 50% in convertible bonds and is up more than 5% over the past thre
