Scared to Tackle Equities? How About a Convertible Bond ETF?

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April 27, 2009 1:30pm NYSE:CWB

etf-newsFor wary and weary investors who find themselves a bit skittish to re-enter the markets, there’s a new exchange traded fund (ETF) that straddles the line between stocks and bonds.

A convertible bond is a hybrid tool for investors that offers exposure to both stocks and bonds and pays investors a coupon smaller than a comparable bond, but gives the investor the option to convert the unit into a stock at a later date if they wish, Tom Anderson, State Street Global Advisor’s head of research and strategy, told us.

State Street recently launched its first-to-market convertible bond ETF, SPDR Barclays Capital Convertible Bond ETF (CWB), just in time for this area of the market to experience a resurgence. These bonds, which have been around since the 1970s, are seeing renewed popularity for two reasons. One is their hybrid status. The other, Anderson says, is that “a lot of investors aren’t ready to get into stocks yet – this gives them a middle ground.”

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