| > a) the DOWNside of buying close-end mutual funds (both stock and bond) AND
This question (if not already answered) belongs in the following topic:
180 SCAACT::RESENDE 29-APR-1992 14 Closed-end mutual funds
> b) I heard that Digital preferred stock is a pretty good, considering
> its stability (little volatility) and dividends (quite a nice %).
For more information/previous discussions specifically about Digital's
prefered stock see the following topic in the Digital_Investing
conference:
221 RANGER::SACKS 26-JAN-1994 41 Preferred Stock?
> I don't understand the issue of "conversion" however. So can anyone
> explain why I should be concerned about conversion and also any
> other downside of buying a preferred stock??
In general a downside to prefered stocks is that because they are
bought mainly for their dividend (ie. income), like utility stocks,
they are interest rate sensitive. If interest rates go up, these
stocks go down in price.
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| Re; conversion
If Dec buys the preferred (depository shares) back in when is it
1999? you'll lose the difference between the $25 face value and the
current price, which seems to float around between 26 and 27. So,
you have to calc your effective interest rate taking that loss into
account, if you think that might happen. (I do, looking at how Dec
has been paying down debt, according to its financial stats.)
I did some back of the envelope calcs awhile ago when I was thinking
of buying more depository shares, and came up with an effective rate
of 5-something percent, basically no better than CDs, if they are
purchased now.
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