1. What are convertible bonds?
|
|
- Amy Barber
- 8 years ago
- Views:
Transcription
1
2 1. What are convertible bonds? Convertible bonds, most importantly, are bonds. They carry all the same promise of repayment of principal and interest of all corporate bonds. Unlike other bonds, though, convertible bonds (or simply convertibles or converts ) give holders the ability to participate in the upside of the issuing company s shares. Investors in convertibles have the right but not the obligation to convert their bonds in order to receive greater value than the promised principal repayment. Convertible bonds are not a new invention. They have been around since the 1800 s, when they were used to finance the Internet of that era, the railroads. Today issuers of convertibles range from blue-chips like Microsoft and Intel to much smaller and more speculative companies. Convertible bonds have several defining features. These are: Coupon (the promised annual interest rate) Maturity Calls and Puts Conversion Ratio Convertible bond coupons are typically lower than coupons of otherwise similar non-convertible bonds. Investors accept the lower coupon because of the valuable option to participate in the stock s upside via conversion. This option is especially important when investors fear an environment of rising interest rates. The possibility of upside can help shield convertibles from the price erosion other bonds suffer in a rising-rate environment. Some convertibles are simply issued with relatively short-term maturities, such as five years. In these cases call and put options are usually omitted. Convertibles with longer stated maturities, such as 20 years, are rarely intended to be outstanding for that long. These longer-dated convertibles typically give holders several earlier opportunities to sell, or put, the bonds back to the issuer, often at five-year intervals. With these bonds, the issuing company usually has the right to call bonds away from investors, also often after five years. The conversion ratio, specified in a convertible s initial documentation, also defines a bond s conversion price. Most convertible bonds are issued in units of $1,000. A conversion ratio of 25 thus implies a conversion price of $40 (1000/25). Conversion prices are typically set at a premium to the market price of the stock when a convertible is issued. The premium is often in the 30-40% range but can vary depending on a variety of factors.
3 Experience Drives Our Strategy. 2. Why should I be interested? In a time of unprecedented low interest rates and high volatility, investors must reconcile their need for income and growth with their understandable desire to protect capital. Convertible bonds can be the solution. A well-chosen convertible bond, bought at the right price, promises no worse than the full return of the original investment, plus the opportunity for significant upside as long as the issuer remains solvent. With stocks, you re always reliant on the market for liquidity. If you know you are going to need a certain amount of cash in several years, it s hard to depend on stocks. You don t want to have to sell into a down market, but you may be forced to. Convertibles can greatly reduce your dependence on market conditions for your liquidity. Instead of stocks, you can buy convertibles that mature or can be put (sold) back to the issuer when you will need the money. As long as the issuing company is solvent, the money will be there. And if the company has done well, you ll be participating in much of the stock s upside. How much of the upside? The rule of thumb is that convertibles typically offer, in the medium term, two-thirds of the upside of stocks with one-third of the downside. But in the longer term, convertibles do even better. Studies have shown that convertibles actually outperform stocks over extended periods, when you take both capital appreciation and coupon income into account. 1 Even more importantly, they do this while putting capital at substantially lower risk. To summarize, convertible bonds almost always provide: Higher income than the underlying stock Known return of principal Lower volatility Superior performance over time There are plenty of good reasons to be interested. 1 Source: Bank of America/Merrill Lynch Convertible Research, March 31, 2012.
4 3. If I think a stock is going up, shouldn't I just buy the stock? It s true that on the upside, convertibles tend to underperform their underlying stocks. This is because when you buy convertibles, you effectively pay a premium to the market price of the stock. Think of it as buying insurance along with your stock. The insurance premium lets you sleep better, knowing that in almost all cases you ll do no worse than recoup par value for your bonds. If you are disciplined about the prices you pay for convertibles, this essentially means you ll get your money back, even if the stock goes down significantly. How much does the premium cut into your upside? A good rule of thumb is to subtract the conversion premium from 100%. If you buy a convertible whose price reflects a 30% premium to the stock price, and hold the convertible for an extended period, it s reasonable to estimate that you ll participate in about 70% of the stock s upside. So, you may ask, why give up so much upside? The answer is simple: while you may think the stock will go up, you don t know that it will. Some of your expectations may not pan out. Even if they do, the market may decide not to agree with you. Here s another way to think about it. If you re so certain a stock is going up, you probably have a better alternative than buying the stock. You can potentially get a much higher return by using options instead. But, you say, with options you can lose everything if your timing is wrong, even if you re ultimately right about the stock. Precisely. And if your timing can be wrong with options, it can be wrong with stocks as well. We like to say that when you buy convertibles, you get paid to wait. You collect your coupons, you take comfort in knowing that you ll almost always at least get your money back, and you wait for the stock to perform. Remember that even though convertibles underperform stocks on the upside, they have outperformed stocks over time. How can this be? Because convertibles outperform stocks on the downside, and successful investing has more to do with limiting downside risk than maximizing upside reward. It s been said that the wisest people are the ones who know how little they know. Investing in convertible bonds makes uncertainty a lot easier to manage.
5 Experience Drives Our Strategy. 4. Can you explain the basic math of convertibles? To understand convertibles, you just need to get comfortable with a few calculations. One is premium. This is the amount by which a convertible s price exceeds the value of the shares it converts into. Bonds with low premiums offer almost as much upside as their underlying shares. However, they are also subject to greater losses, because low-premium convertibles usually trade well above the par value you receive at maturity. In other words, bonds with low premiums trade at a higher prices usually well above 100. Higher-premium bonds, meanwhile, are associated with lower prices. In other words: premium and price go in opposite directions. Consider a convertible bond with a conversion ratio of 25, equivalent to a conversion price of 40 (1000/40), as we saw earlier. You might see the convertible trading around 100 cents on the dollar (equivalent to $1000 per $1000 face amount) when the stock is around 30. This represents a conversion premium of 33% (40/30). Another way to look at this is the bond, trading at $1000, converts into $750 worth of stock ($30 per share times 25 shares per bond). Now let s say the stock doubles to 60. The bond now converts into stock worth $1500 per bond, or 150 cents on the dollar. Let s say this is a relatively new convertible. It has a 3% coupon and four years left until its maturity. The market price will probably be somewhere around 165 cents on the dollar. Where does the 165 come from? High dollar price converts usually are valued by the sum of their conversion value (150), their remaining coupon income (3% annually for 4 years, or 12), and perhaps a small amount of additional premium reflecting the assurance that you will get no worse than 100 at maturity no matter how far the stock drops. (No matter how far, that is, as long as the company remains solvent). Note that 165 is 10% more than 150. So as the stock doubles, the bond s conversion premium goes from 33% to 10%. It s now a very equity-sensitive bond that should participate in around 90% of the stock s upside. But from this point, it will also participate in most of the downside as well.
6 5. How and when do you convert the bonds? One of the biggest misconceptions about convertible bonds is that investors should convert the bonds as soon as the underlying stock exceeds the conversion price. Actually, you only should convert when forced to typically because the bond is maturing or being called, with the stock above the conversion price. In other words, conversion only takes place at the end of the bond s life. Otherwise, if you want to take advantage of the stock s rise, you do something easier than converting. You sell. The convertible market especially hedge funds will buy the bonds and pay an appropriate price, the kind of price we saw in the last question. Remember that if you convert bonds early, you only get their conversion value the value of the underlying shares. You give up residual value representing income the bonds will still generate and insurance that the value will not drop, at the end, below 100 cents on the dollar. Buying convertibles at the right price is the most important part of the process. But knowing when to sell is critical as well.
7 Experience Drives Our Strategy. 6. Aren't convertibles only for hedge funds? While it s true that hedge funds are important participants in the convertible market, they are by no means the most natural buyers of convertibles. In fact, most convertibles are better suited to investors with far longer time horizons than hedge funds. Here s why. Hedge funds specializing in convertibles are expected never to lose money. It s completely unrealistic, but that s what most investors in convertible hedge funds expect. At the same time, hedge funds, in order to generate attractive returns, need to use leverage. Put these together and you have a recipe for the troubles hedge funds have every few years. As long as convertibles behave the way the hedge funds models predict, everything is fine. But once they begin to lag, hedge funds start losing money. Hedge fund investors primarily socalled funds of funds have no tolerance for losses and pull money out, leading to forced sales, especially because hedge funds are using borrowed money and relatively small losses can lead to margin calls. What does this mean for long-term investors seeking to exploit the favorable risk/reward characteristics of convertibles? It means that you re likely to experience occasional mark-to-market losses in the short term. The good news is these losses really amount to buying opportunities. For investors intending to hold convertibles longer-term, hedge funds actually add to the opportunity set. Hedge funds buy high-dollar-price convertibles when disciplined investors look to sell (the hedge funds, of course, hedge the convertibles by selling stock). Hedge funds typically sell at depressed valuations when their investors are demanding liquidity after a month or two of losses. In both cases, hedge funds make it easier for true long-term convertible investors to profit handsomely.
8 7. Why should I use a manager instead of buying convertibles directly? In many ways, convertibles are the ideal asset for the individual. They provide the three characteristics most investors want: Return of capital Current income Upside potential Why, then, should investors use a manager instead of simply buying their own convertibles? For the minority of investors those with the time, resources, and patience to choose and manage their own convertibles this may be a solution. However, there is still a major difficulty. Retail investors generally are penalized when they trade individual bonds, including convertibles, with steep transaction costs. Convertibles trade in a close-knit, relationship-based market. Opportunities to buy and sell advantageously are largely reserved for the larger, more active customers. This is particularly evident in the new-issue market. New issues are typically sold somewhat cheaper than their fair value, and the ability to buy at the issue price is an important source of returns. In addition, institutional investors are better positioned to evaluate special offers sometimes available to convertible holders such as, puts, one-time reductions in conversion price and inducements to extend maturities. While individuals and their representatives can manage these situations, they may prefer to have more experienced convertible professionals handle them. Essentially, while individual investors may want to consider buying convertibles on their own, they may find it easier and more profitable to use an experienced professional convertible manager or advisor. Qualities to look for when selecting a convertible manager or advisor include: Does the investment advisor solely manage convertibles? Has the manager been managing convertibles for a long period of time? Has the investment advisor managed convertibles over several market cycles (i.e. both bull and bear markets)? It is easy in almost any asset class to make money in bull markets, but good managers lose no or little money during bear markets.
9 Experience Drives Our Strategy. 8. What are the biggest risks in convertible bonds? For long-term investors, the largest risk in convertibles is issuer bankruptcy. The beauty of convertibles is that your investment can perform respectably even if the underlying stock does poorly. But it s still important to avoid catastrophes. If you stick with profitable companies, and focus on convertibles whose issuers have plenty of wherewithal to repay, you can generally avoid catastrophes without too much difficulty. Selling just because the price is lower is not necessary: selling when the fundamentals have changed significantly sometimes is. For shorter-term holders, a wide variety of risks affect convertibles. In general the biggest and most obvious is a decline in the stock market. Others include a general deterioration of credit, a sharp rise in interest rates, and, in some cases, a decline in market volatility. Perhaps the most important risk for short-term holders, such as hedge funds, is simply the presence of other sellers. Few hedge funds have the long-term backers needed to withstand a falling market. Such markets, however, benefit long-term holders committed to the asset class.
10 9. How did convertible bonds do in the financial crisis of ? Convertibles, particularly those issued by more speculative companies, experienced severe shortterm losses during the financial crisis. This was primarily because many hedge funds, which had depended on Wall Street firms to lend them money for leverage, found their loans being recalled. The only course of action was to sell, regardless of price. This forced selling by hedge funds created opportunities the likes of which few long-term convertible professionals had ever seen. Creditworthy issuers saw their paper trading with double-digit yields and very modest conversion premiums. It was, in short, the opportunity of a lifetime. As markets stabilized in 2009, convertibles rallied back strongly to outperform stocks. The Bank of America/Merrill Lynch V0A0 Convertible Bond Index was up 47% for the year while the S&P 500 Total Return Index was up 26%. In this process, many longer-term investors that had not been involved with convertibles took advantage of the forced hedge-fund selling. As a result, while hedge funds continue to be a major force in the convertible market, they are not nearly as prevalent as they were pre The biggest lesson from the financial crisis is that while forced selling can take convertibles to remarkably cheap valuations in the short term, the essential value of the asset class will reward those who can stay the course.
11 Experience Drives Our Strategy. 10. What are the prospects for convertible bonds? The zero-rate policy of the Federal Reserve, while enhancing the value of many existing convertible bonds, has created a new set of challenges. The new-issue market, a necessary source of convertibles, has been very slow in the low-rate environment. Many companies that traditionally would have raised money via the convertible market have been able to satisfy their requirements with non-convertible debt. Having said that, many convertibles continue to offer the blend of current income, capital preservation and upside potential that makes them unique, especially in volatile markets. Moreover, a variety of circumstances are likely to bring about a return to greater convertible issuance in the not-too-distant future. These include: A fall in investor demand for high-yield bonds A rise in the overall level of interest rates Strong stock performance in certain industries An increase in the level of market volatility Convertibles have been around for over 150 years. While many so-called experts have predicted their demise repeatedly, top ranking convertible managers have continued to outperform equities and fixed income over full market cycles. They have proven resilient and most worth buying at the low points of their popularity, many times at stock market tops. We firmly believe long-term investors in convertibles will continue to be rewarded with convertible bonds. Important Disclosures: No content in this booklet should be construed as specific investment advice, or replacement for investment advice from Wellesley Investment Advisors, Inc., or any other investment professional. This is not an offer to purchase securities. All investments, including convertible bonds, have a risk of loss. Past performance is not a guarantee of future results. Copyright 2012 Wellesley Investment Advisors, Inc.
12 Thank you for requesting the booklet Top Ten Questions and Answers About Convertible Bonds Wellesley Investment Advisors specializes in one thing: convertible bonds. The professionals at Wellesley have been investing client funds in convertibles for over 20 years. Wellesley manages over $1 billion in convertible bonds for registered investment advisors, investment professionals, institutions, pensions, retirement plans, and high net worth individuals. The Wellesley Investment Advisors Convertible Bond Investment Program is offered through Halbert Wealth Management, an SEC Registered Investment Advisor. For more information, including a detailed performance summary, please contact Halbert Wealth Management at: Bee Cave Road, Suite 200 Austin, TX info@halbertwealth.com Before making a decision to invest, you should review all the important disclosures for the Wellesley Limited Risk Investing Program and make sure you understand all the risks involved. You should also review both Wellesley s and Halbert Wealth Management s Forms ADV, Part 2, which are available upon request. This investment involves the risk of loss and past results are no guarantee of future performance.
Bond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests
a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...
More informationBonds, in the most generic sense, are issued with three essential components.
Page 1 of 5 Bond Basics Often considered to be one of the most conservative of all investments, bonds actually provide benefits to both conservative and more aggressive investors alike. The variety of
More informationInvesting Basics and Your Retirement
Christian Financial Credit Union Roberto Rizza, CRPC Financial Advisor CUSO Financial Services, LP 18441 Utica Road Roseville, MI 48066 586-445-3651 rrizza@cfcumail.org www.christianfinancialcu.org Investing
More informationHolding the middle ground with convertible securities
January 2015» White paper Holding the middle ground with convertible securities Eric N. Harthun, CFA Portfolio Manager Robert L. Salvin Portfolio Manager Key takeaways Convertible securities are an often-overlooked
More informationYukon Wealth Management, Inc.
This summary reflects our views as of 12/15/08. Merrill Lynch High Yield Master Index effective yield at 23%. Asset Class Review: High-Yield Bonds Executive Summary High-yield bonds have had a terrible
More informationU.S. Treasury Securities
U.S. Treasury Securities U.S. Treasury Securities 4.6 Nonmarketable To help finance its operations, the U.S. government from time to time borrows money by selling investors a variety of debt securities
More informationIntroduction to Convertible Debentures
Introduction to Convertible Debentures Intro to Convertible Debentures March, 2009 Convertible debentures are hybrid securities which offer advantages of both bonds and equities. Like ordinary bonds they
More informationInvesting in Bonds - An Introduction
Investing in Bonds - An Introduction By: Scott A. Bishop, CPA, CFP, and Director of Financial Planning What are bonds? Bonds, sometimes called debt instruments or fixed-income securities, are essentially
More informationPROFESSIONAL FIXED-INCOME MANAGEMENT
MARCH 2014 PROFESSIONAL FIXED-INCOME MANAGEMENT A Strategy for Changing Markets EXECUTIVE SUMMARY The bond market has evolved in the past 30 years and become increasingly complex and volatile. Many investors
More informationWith interest rates at historically low levels, and the U.S. economy showing continued strength,
Managing Interest Rate Risk in Your Bond Holdings THE RIGHT STRATEGY MAY HELP FIXED INCOME PORTFOLIOS DURING PERIODS OF RISING INTEREST RATES. With interest rates at historically low levels, and the U.S.
More informationAn Alternative Way to Diversify an Income Strategy
Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed
More informationSankaty Advisors, LLC
Leveraged Loans: A Primer December 2012 In today s market environment of low rates and slow growth, we believe that leveraged loans offer a unique diversification option for fixed income portfolios due
More informationFIN-40008 FINANCIAL INSTRUMENTS SPRING 2008. Options
FIN-40008 FINANCIAL INSTRUMENTS SPRING 2008 Options These notes describe the payoffs to European and American put and call options the so-called plain vanilla options. We consider the payoffs to these
More informationStructured Products. Designing a modern portfolio
ab Structured Products Designing a modern portfolio Achieving your personal goals is the driving motivation for how and why you invest. Whether your goal is to grow and preserve wealth, save for your children
More informationInvesting Basics. Bank of the Bluegrass Wealth Management 215 Southland Drive Lexington, KY 40383 859-233-4500
Bank of the Bluegrass Wealth Management 215 Southland Drive Lexington, KY 40383 859-233-4500 Investing Basics 2013 Page 1 of 9, see disclaimer on final page Saving and Investing Wisely The impact of 3%
More informationInvesting Offers Rewards And Poses Risks. Investment Basics: The Power of Compounding. How Do Americans Invest Their Savings? (HA)
How Do Americans Invest Their Savings? (HA) Learning how to save money for future use is an important first step in reaching your long-term goals. But saving alone is not enough. You will also need to
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
ECON 4110: Sample Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economists define risk as A) the difference between the return on common
More informationHow credit analysts view and use the financial statements
How credit analysts view and use the financial statements Introduction Traditionally it is viewed that equity investment is high risk and bond investment low risk. Bondholders look at companies for creditworthiness,
More informationEquity Investing Evolved Manage risk, stay invested
Equity Investing Evolved Manage risk, stay invested HSBC Buffered Strategies Are you on track to meet your retirement and investment goals? Have extreme market swings prevented you from investing? Would
More informationCHAPTER 20: OPTIONS MARKETS: INTRODUCTION
CHAPTER 20: OPTIONS MARKETS: INTRODUCTION PROBLEM SETS 1. Options provide numerous opportunities to modify the risk profile of a portfolio. The simplest example of an option strategy that increases risk
More informationBASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket
Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,
More informationUnderstanding Fixed Income
Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding
More informationPrinciples for investment success. We believe you will give yourself the best chance of investment success if you focus on what you can control
Principles for investment success We believe you will give yourself the best chance of investment success if you focus on what you can control Important information This guide has been produced for educational
More informationDetermining your investment mix
Determining your investment mix Ten minutes from now, you could know your investment mix. And if your goal is to choose investment options that you can be comfortable with, this is an important step. The
More informationWeb. Chapter FINANCIAL INSTITUTIONS AND MARKETS
FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest
More informationBeginner s Guide to Bonds
Beginner s Guide to Bonds Chapter 1.1-1.4 www.trader.ge Bonds Chapter 1.1 / A Basic Description Welcome to this first chapter on Bonds which will give a brief introduction to the history of bonds and explain
More informationInvestment insight. Fixed income the what, when, where, why and how TABLE 1: DIFFERENT TYPES OF FIXED INCOME SECURITIES. What is fixed income?
Fixed income investments make up a large proportion of the investment universe and can form a significant part of a diversified portfolio but investors are often much less familiar with how fixed income
More informationCHAPTER 22: FUTURES MARKETS
CHAPTER 22: FUTURES MARKETS PROBLEM SETS 1. There is little hedging or speculative demand for cement futures, since cement prices are fairly stable and predictable. The trading activity necessary to support
More informationFixed Income: The Hidden Risk of Indexing
MANNING & NAPIER ADVISORS, INC. Fixed Income: The Hidden Risk of Indexing Unless otherwise noted, all figures are based in USD. Fixed income markets in the U.S. are vast. At roughly twice the size of domestic
More information- Short term notes (bonds) Maturities of 1-4 years - Medium-term notes/bonds Maturities of 5-10 years - Long-term bonds Maturities of 10-30 years
Contents 1. What Is A Bond? 2. Who Issues Bonds? Government Bonds Corporate Bonds 3. Basic Terms of Bonds Maturity Types of Coupon (Fixed, Floating, Zero Coupon) Redemption Seniority Price Yield The Relation
More informationYour Window on Investing
Your Window on Investing Diversification Your Best Defence If you pay attention to the financial media, investment is all about shares. But the bond market is just as important. If shares are the sword
More informationMutual Fund Investing Exam Study Guide
Mutual Fund Investing Exam Study Guide This document contains the questions that will be included in the final exam, in the order that they will be asked. When you have studied the course materials, reviewed
More informationBond valuation. Present value of a bond = present value of interest payments + present value of maturity value
Bond valuation A reading prepared by Pamela Peterson Drake O U T L I N E 1. Valuation of long-term debt securities 2. Issues 3. Summary 1. Valuation of long-term debt securities Debt securities are obligations
More informationAnswers to Concepts in Review
Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,
More informationDFA INVESTMENT DIMENSIONS GROUP INC.
PROSPECTUS February 28, 2015 Please carefully read the important information it contains before investing. DFA INVESTMENT DIMENSIONS GROUP INC. DFA ONE-YEAR FIXED INCOME PORTFOLIO Ticker: DFIHX DFA TWO-YEAR
More informationOption Theory Basics
Option Basics What is an Option? Option Theory Basics An option is a traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon, or derived
More informationBERYL Credit Pulse on High Yield Corporates
BERYL Credit Pulse on High Yield Corporates This paper will summarize Beryl Consulting 2010 outlook and hedge fund portfolio construction for the high yield corporate sector in light of the events of the
More informationEcon 80H: Introduction
Basic information Course web site: www.econ.ucsc.edu/faculty/elbaum Bernard Elbaum, Economics Dept., Engineering 2, Room 431, ext. 9-4248, email LBAUM@ucsc.edu Office hours, Tu Th 1-2 Econ 80H: Introduction
More informationImpact of rising interest rates on preferred securities
Impact of rising interest rates on preferred securities This report looks at the risks preferred investors may face in a rising-interest-rate environment. We are currently in a period of historically low
More informationNPH Fixed Income Research Update. Bob Downing, CFA. NPH Senior Investment & Due Diligence Analyst
White Paper: NPH Fixed Income Research Update Authored By: Bob Downing, CFA NPH Senior Investment & Due Diligence Analyst National Planning Holdings, Inc. Due Diligence Department National Planning Holdings,
More informationFinancial Wellness & Education. Understanding mutual funds
Financial Wellness & Education Understanding mutual funds Benefits of mutual funds Foresters Financial Services provides everyday families and individuals with financial solutions, guidance and tools,
More informationMarket Linked Certificates of Deposit
Market Linked Certificates of Deposit This material was prepared by Wells Fargo Securities, LLC, a registered brokerdealer and separate non-bank affiliate of Wells Fargo & Company. This material is not
More informationBOND ALERT. What Investors Should Know. July 2013 WWW.LONGVIEWCPTL.COM 2 MILL ROAD, SUITE 105
BOND ALERT July 2013 What Investors Should Know This special report will help you understand the current environment for bonds and discuss how that environment may change with rising interest rates. We
More informationBasic Investment Education
Disclaimer: The information provided below is for information purposes only - it is not investment advice. If you have any questions about your own personal financial situation, you should consult with
More informationINTRODUCTION TO BETASHARES YIELD MAXIMISER FUNDS ASX CODE: YMAX (Australian Equities) & UMAX (US Equities)
ASX CODE: YMAX (Australian Equities) & UMAX (US Equities) www.betashares.com.au One of the more enduring investment themes in recent times has been the desire for income combined with less volatility.
More informationHigh-yield bonds. Bonds that potentially reward investors for taking additional risk. High-yield bond basics
High-yield bonds Bonds that potentially reward investors for taking additional risk Types of high-yield bonds Types of high-yield bonds include: Cash-pay bonds. Known as plain vanilla bonds, these bonds
More informationSmall/Mid-Cap Quality Strategy (including FPA Paramount Fund, Inc. and FPA Perennial Fund, Inc.)
Small/Mid-Cap Quality Strategy (including FPA Paramount Fund, Inc. and FPA Perennial Fund, Inc.) Investment Policy Statement OVERVIEW Investment Objective and Strategy The primary objective of the FPA
More informationInvestment Bond. Funds key features. This is an important document. Please keep it safe for future reference.
Investment Bond Funds key features. This is an important document. Please keep it safe for future reference. 2 WHAT ARE THE FUNDS KEY FEATURES? This document is part of the information we provide you to
More informationBalanced fund: A mutual fund with a mix of stocks and bonds. It offers safety of principal, regular income and modest growth.
Wealth for Life Glossary Aggressive growth fund: A mutual fund that aims for the highest capital gains. They often invest in smaller emerging companies that offer maximum growth potential. Adjustable Rate
More informationSaving and Investing Wisely
Quest Capital Management, Inc. 8235 Douglas Avenue Suite 500 Dallas, TX 75225 214-691-6090 info@questadvisor.com www.questadvisor.com Investing Basics Saving and Investing Wisely Saving builds a foundation
More informationCrafting a Forward Looking Investment Portfolio
BOURSE SECURITIES LIMITED February 15th, 2016 Crafting a Forward Looking Investment Portfolio This week, we at Bourse evaluate the investment considerations and opportunities having looked previously at
More informationImportant Information about Closed-End Funds and Unit Investment Trusts
Robert W. Baird & Co. Incorporated Important Information about Closed-End Funds and Unit Investment Trusts Baird has prepared this document to help you understand the characteristics and risks associated
More informationSaving and Investing 101 Preparing for the Stock Market Game. Blue Chips vs. Penny Stocks
Saving and Investing 101 Preparing for the Stock Market Game ============================================================================== Size Segmentation Blue Chips vs. Penny Stocks Blue chips, like
More informationTraditionally pension schemes invested in four main asset classes: Shares (Equities or Stocks), Bonds, Property and Cash.
Asset Classes Traditionally pension schemes invested in four main asset classes: Shares (Equities or Stocks), Bonds, Property and Cash. Shares (also called Equities or Stocks) are shares bought in quoted
More informationEffective downside risk management
Effective downside risk management Aymeric Forest, Fund Manager, Multi-Asset Investments November 2012 Since 2008, the desire to avoid significant portfolio losses has, more than ever, been at the front
More informationInvestments GUIDE TO FUND RISKS
Investments GUIDE TO FUND RISKS CONTENTS Making sense of risk 3 General risks 5 Fund specific risks 6 Useful definitions 9 2 MAKING SENSE OF RISK Understanding all the risks involved when selecting an
More informationUnderstanding RSPs. Your Guide to Retirement Savings Plans
Understanding RSPs Your Guide to Retirement Savings Plans Getting Started Some retirement basics Getting Ahead Setting your retirement savings goals Getting the Most Maximizing your RSP growth Getting
More informationDetermining your investment mix.
Determining your investment mix. Ten minutes from now, you could know your investment mix: And if your goal is to choose investment options that you can be comfortable with, this is an important step.
More informationUnderstanding Fixed Indexed Annuities
Fact Sheet for Consumers: Understanding Fixed Indexed Annuities PRESENTED BY Insured Retirement Institute Fact Sheet for Consumers: Understanding Fixed Indexed Annuities Put simply, a Fixed Indexed Annuity
More informationClick Here to Buy the Tutorial
FIN 534 Week 4 Quiz 3 (Str) Click Here to Buy the Tutorial http://www.tutorialoutlet.com/fin-534/fin-534-week-4-quiz-3- str/ For more course tutorials visit www.tutorialoutlet.com Which of the following
More informationThe Infinite Banking Concept (aka Becoming Your Own Banker ): One Actuary s Commentary
The Infinite Banking Concept (aka Becoming Your Own Banker ): One Actuary s Commentary Advisors sometimes call LLIS because their clients have been approached by an insurance salesperson pitching a concept
More informationCHAPTER 21: OPTION VALUATION
CHAPTER 21: OPTION VALUATION 1. Put values also must increase as the volatility of the underlying stock increases. We see this from the parity relation as follows: P = C + PV(X) S 0 + PV(Dividends). Given
More informationStocks Basics Florida International University College of Business State Farm Financial Literacy Lab http://www.business.fiu.edu/sffll 305-348-1542
Stocks Basics Florida International University College of Business State Farm Financial Literacy Lab http://www.business.fiu.edu/sffll 305-348-1542 1 Stocks Stocks are the most popular and known to be
More informationFinancial ratio analysis
Financial ratio analysis A reading prepared by Pamela Peterson Drake O U T L I N E 1. Introduction 2. Liquidity ratios 3. Profitability ratios and activity ratios 4. Financial leverage ratios 5. Shareholder
More informationMunis: Still Delivering in Tough Conditions? July 2014
Munis: Still Delivering in Tough Conditions? July 2014 Columbia Management s James Dearborn finds plenty of opportunity in munis today Over the past year, James Dearborn says, a challenging part of his
More informationInvestor Guide to Bonds
Investor Guide Investor Guide to Bonds threadneedle.com Introduction Why invest in bonds? Although your capital is normally considered safe in a traditional deposit account, low interest rates have eroded
More informationhttp://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial.
Bond Basics Tutorial http://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx
More informationShort Selling Tutorial
Short Selling Tutorial http://www.investopedia.com/university/shortselling/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/investopedia/contact.asp
More informationPRESENT DISCOUNTED VALUE
THE BOND MARKET Bond a fixed (nominal) income asset which has a: -face value (stated value of the bond) - coupon interest rate (stated interest rate) - maturity date (length of time for fixed income payments)
More informationPIPEs: Private Equity Investments in Distressed Firms
UVA -F-1412 PIPEs: Private Equity Investments in Distressed Firms Direct investment in the equity of distressed companies by private equity investors is a relatively recent phenomenon dating to the mid-1990s.
More informationThe recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong
Investment Insights The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong Kevin Lorenz, CFA, Managing Director, Lead Portfolio Manager of TIAA-CREF's High-Yield Fund
More informationBond Market Perspectives
LPL FINANCIAL RESEARCH Bond Market Perspectives March 26, 2013 High-Yield Bonds and the Credit Cycle Anthony Valeri, CFA Market Strategist LPL Financial Highlights More speculative issuance has increased
More informationToday s bond market is riskier and more volatile than in several generations. As
Fixed Income Approach 2014 Volume 1 Executive Summary Today s bond market is riskier and more volatile than in several generations. As interest rates rise so does the anxiety of fixed income investors
More informationChapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS
Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 9-1 a. A bond is a promissory note issued by a business or a governmental unit. Treasury bonds, sometimes referred to as
More informationFAQ. (Continued on page 2) An Investment Advisory Firm
FAQ An Investment Advisory Firm What is QASH Flow Advantage? It is a time-tested model that includes three strategic components: A portfolio of carefully selected Exchange-Traded Funds (ETFs) for diversification
More informationGLOSSARY OF INVESTMENT-RELATED TERMS FOR NATIONAL ELECTRICAL ANNUITY PLAN PARTICIPANTS
GLOSSARY OF INVESTMENT-RELATED TERMS FOR NATIONAL ELECTRICAL ANNUITY PLAN PARTICIPANTS General Information This Glossary of Investment-Related Terms for National Electrical Annuity Plan Participants (the
More informationLesson 6 Save and Invest: Bonds Lending Your Money
Lesson 6 Save and Invest: Bonds Lending Your Money Lesson Description This lesson introduces bonds as an investment option. Using a series of classroom visuals, students will identify the three main parts
More informationChapter 5 Option Strategies
Chapter 5 Option Strategies Chapter 4 was concerned with the basic terminology and properties of options. This chapter discusses categorizing and analyzing investment positions constructed by meshing puts
More informationHow To Buy Stock On Margin
LESSON 8 BUYING ON MARGIN AND SELLING SHORT ACTIVITY 8.1 A MARGINAL PLAY Stockbroker Luke, Katie, and Jeremy are sitting around a desk near a sign labeled Brokerage Office. The Moderator is standing in
More informationAn Introduction to the Impact of Mark to Market Accounting on MBIA and Financial Guarantors
An Introduction to the Impact of Mark to Market Accounting on MBIA and Financial Guarantors MBIA provides credit protection on municipal, essential asset and securitized financings, and the terms and conditions
More informationMutual Funds 101. What is a Mutual Fund?
Mutual Funds 101 So you re looking to get into the investment game? Great! Mutual funds are a good investment option. But before you invest, make sure to do your research! You would never go to a car dealership,
More informationBonds are IOUs. Just like shares you can buy bonds on the world s stock exchanges.
Investing in bonds Despite their names, ShareScope and SharePad are not just all about shares. They can help you with other investments as well. In this article I m going to tell you how you can use the
More informationLecture 1: The Options Market and Options Trading
Lecture 1: The Options Market and Options Trading Before you trade options, it is essential that you have a good working knowledge of how to evaluate stocks and the underlying factors that influence share
More informationClosed-End Funds. A closed-end fund is a type of investment company. whose shares are listed on a stock exchange
a guide to Closed-End Funds A closed-end fund is a type of investment company whose shares are listed on a stock exchange or are traded in the over-the-counter market. Contents What Is a Closed-End Fund?...2
More informationCHAPTER 14: BOND PRICES AND YIELDS
CHAPTER 14: BOND PRICES AND YIELDS PROBLEM SETS 1. The bond callable at 105 should sell at a lower price because the call provision is more valuable to the firm. Therefore, its yield to maturity should
More informationNAME: CLASS PERIOD: An Introduction to Stocks and Bonds
22.1 An Introduction to Stocks and Bonds There are many different ways to invest your money. Each of them has different levels of risk and potential return. Stocks and bonds are two common types of financial
More informationNavigator Fixed Income Total Return
CCM-15-12-1 As of 12/31/2015 Navigator Fixed Income Navigate Fixed Income with a Tactical Approach With yields hovering at historic lows, bond portfolios could decline if interest rates rise. But income
More informationUnderstanding Stock Options
Understanding Stock Options Introduction...2 Benefits Of Exchange-Traded Options... 4 Options Compared To Common Stocks... 6 What Is An Option... 7 Basic Strategies... 12 Conclusion...20 Glossary...22
More informationasset classes Understanding Equities Property Bonds Cash
NEWSLETTER Understanding asset classes High return Property FIND OUT MORE Equities FIND OUT MORE Bonds FIND OUT MORE Cash FIND OUT MORE Low risk High risk Asset classes are building blocks of any investment.
More informationCharacteristics of Convertible Bonds. Equity + Bond
Characteristics of Convertible Bonds Equity + Bond Convertible bonds Combination of bonds and equities bond plus a call option on stock * bondholder has the right to convert the bond into common shares
More informationINVESTMENT DICTIONARY
INVESTMENT DICTIONARY Annual Report An annual report is a document that offers information about the company s activities and operations and contains financial details, cash flow statement, profit and
More informationThe Argument for Corporate Debt December 2008
The Argument for Corporate Debt December 2008 This past quarter the US economy has experienced what appears to be the crescendo of a credit crisis that has been building for well over a year. The causes
More information11 Option. Payoffs and Option Strategies. Answers to Questions and Problems
11 Option Payoffs and Option Strategies Answers to Questions and Problems 1. Consider a call option with an exercise price of $80 and a cost of $5. Graph the profits and losses at expiration for various
More informationAsset allocation A key component of a successful investment strategy
Asset allocation A key component of a successful investment strategy This guide has been produced for educational purposes only and should not be regarded as a substitute for investment advice. Vanguard
More informationOctober 2003 UNDERSTANDING STOCK OPTIONS
October 2003 UNDERSTANDING STOCK OPTIONS Table of Contents Introduction 3 Benefits of Exchange-Traded Options 5 Orderly, Efficient, and Liquid Markets Flexibility Leverage Limited Risk for Buyer Guaranteed
More informationEquity Value, Enterprise Value & Valuation Multiples: Why You Add and Subtract Different Items When Calculating Enterprise Value
Equity Value, Enterprise Value & Valuation Multiples: Why You Add and Subtract Different Items When Calculating Enterprise Value Hello and welcome to our next tutorial video here. In this lesson we're
More informationManaging Home Equity to Build Wealth By Ray Meadows CPA, CFA, MBA
Managing Home Equity to Build Wealth By Ray Meadows CPA, CFA, MBA About the Author Ray Meadows is the president of Berkeley Investment Advisors, a real estate brokerage and investment advisory firm. He
More informationAdvanced Strategies for Managing Volatility
Advanced Strategies for Managing Volatility Description: Investment portfolios are generally exposed to volatility through company-specific risk and through market risk. Long-term investors can reduce
More information