Definition of "Convertible Securities"

Corporate securities (usually preferred stock or bonds) that are exchangeable into a fixed number of shares of common stock at a stipulated price. Convertibles may also be exchanged into other forms of the security, but it is unusual. Convertible securities are usually bought by investors who want higher income than what can be received from common stock combined with a greater potential for appreciation than what can be received from regular bonds. A corporation will issue convertibles to enhance the marketability of their securities.