Skeptical of Stocks? Try Convertibles

This Allianz convertible fund has delivered stock-like gains with less risk than the market.

More than four years into a powerful bull market, there are signs that rank-and-file investors are creeping back into stocks. But they're doing so with fear, uncertainty and doubt, driven mainly by the lack of appealing alternatives. If you're skeptical of stocks and annoyed with the microscopic yields on bonds, consider convertibles — hybrids that give you a piece of both asset classes. Converts are part common stock and part bond or preferred stock (a security that behaves much like a bond). They offer you the chance to participate in stock market gains but with less risk than stocks. They also throw off more income than common stocks, though they typically pay less than a company's regular bonds.

One of the stars in this group is AllianzGI Convertible (symbol ANZDX). Although the no-load, low-minimum Class D shares of the fund have been available for only three years, the fund's institutional class is tops in the category over the past ten years, with an annualized return of 10.9% through May 17. That beat the typical convertible fund by an average of 3.7 percentage points per year. Moreover, the fund has been in the top 30% of its category in eight of the past ten calendar years.

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Anjelica Tan
Reporter, Kiplinger's Personal Finance
Tan joined Kiplinger in June 2012 from Bloomberg News, where she was a reporting intern covering mergers and acquisitions and IPOs in New York. Prior to that, she worked as a production intern at CNN in Washington, D.C., where she assisted with political research and live broadcasts. She also covered financial regulation, including the Dodd-Frank Act, as a reporter for the Medill News Service. Before that, she wrote about economics and commodities in Chicago. She has written for the New York Times, MarketWatch,, United Press International and the San Francisco Chronicle. She holds a BBA in finance from the University of Michigan and an MS in journalism from Northwestern University.