Bonds
How do I Buy Bonds?

Most bond transactions can be completed through a full service or discount brokerage . You can also open an account with a bond broker, but be warned that most bond brokers require a minimum initial deposit of $5,000. If you cannot afford this amount, we suggest looking at a mutual fund that specializes in bonds (a bond fund ).

Some financial institutions will provide their clients with the service of transacting government securities. If, however, your bank doesn't provide this service and you do not have a brokerage account, you can purchase government bonds through a government agency (this is true in most countries). In the U.S. you can buy bonds directly from the government through TreasuryDirect at http://www.treasurydirect.gov . The Bureau of the Public Debt started TreasuryDirect so that individuals could buy bonds directly from the Treasury, thereby bypassing a broker. All transactions and interest payments are done electronically.

If you do decide to purchase a bond through your broker, he or she may try to tell you that the trade is commission free. Don't be fooled. What typically happens is that the broker will markup the price slightly; this markup is really the same as a commission. To make sure that you are not being taken advantage of, simply look up the latest quote for the bond and determine whether the markup is acceptable.

Just remember to research your bond just as you would a stock. We've gone over several of the factors that need to be considered before loaning money to a government or company, so do your homework!

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