The best course for individuals, however, may be investing in a convertible mutual fund.

A few convertible funds also have big holdings of common stock, which can reduce their diversification benefit.

Some of these problems can be remedied by investing in one of the 24 open-end convertible funds.

But convertible funds are not bought by equity investors - they're sold to bond buyers.

Among convertible funds, Fidelity has the best balance of yield and growth, he said.

Some convertible funds have outperformed the S.& P. during the last decade while taking on less volatility.

Many fund analysts and financial advisers agree that most investors are better off in convertible funds instead of individual convertible issues.

But Mr. Peng and others point out that there are clear costs in owning convertible funds.

It ranked among the top 12 percent of convertible funds, which lost an average of 1.2 percent, annualized.

Investors should find a broker to assess a convertible, or buy one of 39 convertible mutual funds, up from just seven in 1982.