20 Investments

Closed – end investment

A closed-end fund is an investment fund that issues a fixed number of shares in an actively managed portfolio of securities. The shares are traded in the market just like stocks, but because closed-end funds represent a portfolio of securities they are very similar to a mutual fund. Unlike a mutual fund, the market price of the shares is determined by supply and demand and not by net asset value.
 

Collectibles

Generally speaking, a collectible is any physical asset that appreciates in value over time because it is rare or it is desired by many. Many people think of collectibles as things like stamps, coins, fine art or sports cards, but there really are no strict rules as to what is or is not a collectible.

Convertible Security

A convertible, sometimes called a CV, is either a convertible bond or a preferred stock convertible. A convertible bond is a bond that can be converted into the company’s common stock. You can exercise the convertible bond and exchange the bond into a predetermined amount of shares in the company. The conversion ratio can vary from bond to bond. You can find the terms of the convertible, such as the exact number of shares or the method of determining how many shares the bond is converted into, in the indenture. For example, a conversion ratio of 40:1 means that every bond (with a $1,000 par value) you hold can be exchanged for 40 shares of stock. Occasionally, the indenture might have a provision that states the conversion ratio will change through the years, but this is rare.

Strengths

Your original investment cannot go lower than the market value of the bond; it doesn’t matter what the stock price does until you convert into stock.

Convertibles can be purchased through tax-deferred retirement accounts.

CVs gain popularity in times of uncertainty, when interest rates are high and stock prices are low. This is the best time to buy a convertible.

Weaknesses

he return on the bond or preferred stock is usually quite low.

“Forced conversion” means the company can make you convert your bond into stock at virtually any time. Pay very close attention to the price at which the bonds are callable.

Three Main Uses

Capital Appreciation

Safe Investment

Tax-Deferred Investment

Common Stock