Convertible Security

Convertible securities are cool because they can be “converted” into other investments. Take that with a grain of salt; no, this is not an investment magic trick in which you can convert your penny stock shares to Apple shares.

Typically a convertible security comes in the form of preferred stock that can be converted to common stock. Convertible preferred stock has its own dividend payout that is lower than its common stock counterpart, because it has the convertible feature. When the common stock reaches a certain price, you are in the clear to convert, should you choose to do so.