Reduce Volatility and Increase Yield With This ETF
SPDR Barclays Convertible Securities ETF is a smart buy for equity investors willing to trade some of the upside of equities for some downside protection and yield.
Tom Boccellari: Equity investors looking to reduce their portfolio volatility and increase their yield may consider SPDR Barclays Convertible Securities ETF (CWB). The fund tracks an index of convertible bonds.
Convertible bonds are bonds that allow the investor to convert their bonds into shares of the company at a strike price that is generally above the current market price. Because of the bond's equity option, it tends to pay less interest than traditional corporate bonds. Because of lower coupon payments, they tend to be a cheap and attractive way for non-investment-grade companies to raise capital.
Thomas Boccellari does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.