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Definition of 'Convertibles'
Securities, usually bonds or preferred shares, that can be converted into common stock. Convertibles are most often associated with convertible bonds, which allow bond holders to convert their creditor position to that of an equity holder at an agreed upon price. Other convertible securities can include notes and preferred shares, which can possess many different traits.
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Investopedia explains 'Convertibles'
Convertibles are ideal for investors demanding greater potential for appreciation than bonds provide, and higher income than common stocks offer. Convertible bonds, for instance, will typically offer a lower coupon than a standard bond. However, the optionality of the bond to convert it to common stock adds value for the bond holder.
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