[l2ridehd]

As with anything, it depends. Convertible bonds are usually issued by companies with a low credit rating and high growth potential. So bond payback risk is inherent.

To compensate for having additional value through the option to convert the bond to stock, a convertible bond typically has an interest rate lower than that of similar, non-convertible debt. The investor receives the potential upside of conversion into equity while protecting downside with cash flow from the interest payments and the return of principal upon maturity.

You also have the risk of stock value dilution. If the stock price goes up and all the bond holders decide to convert, then stock price will drop.

So what you need to find is bonds from a company with at least an OK credit rating, willing to provide an acceptable interest rate, with growth potential, that has not issued so many convertible bonds that you have a stock price dilution exposure.

Owning these should be reserved for the higher risk portion of your investment portfolio.