Barron’s just published an excellent article on convertibles, those mysterious investment vehicles often shunned by individuals and rarely understood even by “professionals”.  According to the article, convertibles have fallen 36% so far this year.


Converts have been hit hard for three main reasons: The stock market is down, the corporate bond market has been whacked, and hedge funds, once the dominant investors in convertibles, have been forced sellers after terrible performance this year.

Convertibles can be either preferred stock or bonds, which are often high yield.  Preferred shares ranks higher then common shares in the event of a bankruptcy, but carries no voting rights that the common shares do.  Preferred shares may also offer preferred dividends which are in line ahead of common share dividends for payment.

The Barrons article mentions three companies that offer convertible funds – Fidelity, Vanguard and Putnam.  I’ve listed three of the funds to start your own research, if you buy into the potential recovery of convertible funds that Barron’s does.

  • Fidelity Convertible Securities Fund (FCVSX)
  • Vanguard Convertible Securities Fund (VCVSX)
  • Putnam Convertible Income Growth Fund (Class A Shares:  PCONX, Class B Shares:  PCNBX)