How to Buy Bonds

Tips on Buying Bonds

1. First you’ll need to know the different types of bonds available for you to purchase. The federal government issues treasury bonds—these bonds are not subject to local and state taxes. Corporations issue corporate bonds, which usually yield large returns for purchasers. Municipal bonds are issued by local governments to fund community projects. These bonds are not subjected to federal taxes, and in many cases, local taxes too.

2. Seek out the help of a financial adviser. He or she will be able to tell you which types of bonds are available for purchase, as well as which types of bonds might be best for you to buy.

3. The most important thing you will need to figure out with buying bonds is how the interest gets paid out. Bonds pay out interest monthly, quarterly and annually. Depending on your financial situation, select a bond that pays out interest in a time period that’s suitable for your life.

4. Another important thing to figure out is the bond’s rating. If a bond has a high rating, it’s generally considered to be a secure bond (i.e. a safe bond to buy). It also means that its interest rate is lower. If you are a risk taker, check out junk bonds. They offer high interest returns, but pitfalls galore. Corporate bonds are quite often the best way to go, as most are quite safe to buy and yield high interest returns.

5. You should get a good understanding of how interest rates work before buying bonds. Know that when interest rates rise, the bond you are holding could become less profitable.

6. When you are ready to purchase bonds, do so through a full-service broker. Most charge a commission, but you’ll be getting peace of mind in knowing that a professional is assisting you with your purchase. If you already talk the bond talk and walk the bond walk, then make your purchase through an online site, where you buy the bonds yourself and pay no professionals for assistance

Caution

Do not buy bonds blindly! You must investigate the bonds you are thinking of purchasing for stability and interest return dependability. Research bonds through independent agencies like Standard and Poor’s.

Where to Buy Bonds

Below are some Web sites where you can purchase bonds—

TreasuryDirect offers customers the chance to buy saving bonds online. You can set up an investment portfolio and learn about treasury securities, too.

If you want to purchase bonds independently, check out E Trade Financial. You can open an account and begin buying bonds, stocks and mutual funds almost immediately.

If you are interested in purchasing mutual bonds, check out FMS Bonds. Here you can learn about, search for and make purchases on mutual bonds, all with just a few clicks of your mouse.