How to Buy Bonds

How to Buy Bonds

The questions I am getting most often from investors these days are (aside from "Is now a good time to get into the market?") about how to buy bonds.

At the outset, it is worth noting that yields are low today; and most experts believe they will rise. When yields rise, bond prices drop. This is not much of a concern to many investors because they will still get their principal back ( there is, however, an opportunity cost) as long as they hold the bonds to maturity. And that is their main concern.

The process that will follow is covered in my 3 day face-to-face course . If it would help you to sit down with me to go over this, please give me a call.

The Process

You should begin by looking at the inventory that is held by your broker. For example, if you use Charles Schwab, putter around on their site until you find their inventory. If you can't find their inventory, call your rep and get help. If you're still stuck, drop me an email and I'll tell you what to click on.

Here we'll look at Zion's Bank. You should know I am in no way affiliated with Zion's Bank and receive no compensation from them. They are a source of bond inventory and, because the bond market is an over-the-counter market, it is always good to have alternative sources.

Begin by going to Zions Bank. Click "Investments." Click on their logo "ZIONS DIRECT." Click "BOND STORE" and then "SEARCH BONDS." Note that there is a $10.95 transaction fee to buy bonds--worth comparing to the fee charged by your broker.

At this page, you see a wide range of bond categories including "Municipal Bonds," "Investment Grade Corps.," "High Yield Corporates," and even "Treasuries." Incidentally, if you are interested in buying Treasury issues on an ongoing basis, you may want to check out Treasury Direct, where you can set up a commission-free account to buy Treasury issues in their regularly scheduled auctions.

Click on "Investment Grade Corporates". You come to:

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Note the boxes I filled indicating desired maturity range, price range, etc. You can obviously put in other desired characteristics. At the bottom, I filled in all of the "exclude " bubbles; but, if you want to include callable bonds etc., you can do that as well.



Bond Inventory

Next click "Search." This produces:


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You can edit your search and eliminate bonds, etc. One thing you want to do, just for edification purposes, is to click on "Build Ladder." There you will find interest payments specified, etc. This is almost equivalent to constructing your personal annuity.

Follow Up

Play around with the specifications. Look at the below investment grade offerings, and compare yields for different maturities. Follow bonds over time and see how their prices change as yields change. Go to the Fidelity site and see if you can find their bond inventory.

Disclaimer

This information is intended for educational purposes only and is not a recommendation for any specific investor.