Set up a brokerage account. Investors can purchase bonds through a brokerage firm which is in communication with governments and companies that want to issue debt. They also have access to the markets where bonds trade in the secondary market.[7] Consider how much advice you need to set up an account.
- If you plan to direct your own investments, you can set up an account online by going to the website of a brokerage firm such as Charles Schwab, Fidelity or TD Ameritrade.
- If you wish to work with an advisor, you can locate an independent professional in your area through one of the following sites: www.fpa.net, www.letsmakeaplan.org, www.napfa.org, www.garrettplanningnetwork.com.
- You can also go to your local bank or full service firm; just make sure you shop around, as fees and services can vary a great deal.
- When an investor opens an account, the individual will be asked to complete a customer new account form. They will answer questions about investment experience and risk tolerance. When the account is approved, the investor can transfer funds into the account to purchase bonds.
Purchase individual bonds for your portfolio. One investment objective is your timeframe for investing. If an investor has a specific time period for investing, they can select bonds that mature near that future date.[8]
- Bonds have maturity dates from just a few years to 30 years.
- Investors should consider the maturity date of the bond, and when they need access to their invested funds.
- Say, for example, that an investor plans on retiring in 15 years. They can buy bonds with maturity date of 15 years. The bond issuers will return the invested funds on that date. The longer until maturity, the higher the interest rate offered on the bond.
Purchase individual bonds for your portfolio. One investment objective is your timeframe for investing. If an investor has a specific time period for investing, they can select bonds that mature near that future date.[8]
- Bonds have maturity dates from just a few years to 30 years.
- Investors should consider the maturity date of the bond, and when they need access to their invested funds.
- Say, for example, that an investor plans on retiring in 15 years. They can buy bonds with maturity date of 15 years. The bond issuers will return the invested funds on that date. The longer until maturity, the higher the interest rate offered on the bond.
Place an order. Once an investor decides on a bond, a brokerage firm can place the order for him or her. If new offerings are available, investors can buy a bond when it is issued. Most bond purchases, however, are placed in the secondary market. In that instance, the investor is buying the bond from another investor.[11]
- An investor will receive a confirmation from the brokerage firm. The confirmation details the purchase. Trade confirmations should be kept on file.
- Most investors typically hold their securities at the brokerage firm. That allows people to easily access and sell the bonds, or turn them in at maturity. Investors also receive a statement from the firm. The brokerage statement will detail all of the securities holdings at the firm.
- If an investor decides to sell the bond before maturity, the brokerage firm will quote a sale price. That price is based on demand in the secondary market.
- When an investor places a sell order, the brokerage firm will deliver securities to the buyer. The investor also receives a trade confirmation for a bond sale.