How to buy bonds?

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140

Answer 1 · 2015-07-31 19:43:59

Ryan Fuchs, Financial Planner

@RyanFuchs • 07/31/15 This answer was first published on 07/31/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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If you are just getting started, I too would suggest looking to Exchange Traded Funds (ETFs), as that will effectively get exposure to a basket of bonds. Unless you are sitting on large amounts of cash, it would be difficult to construct a quality bond portfolio buying individual bonds on your own.

That being said, while exposure to bonds is prudent and generally wise to include in your portfolio, I wouldn't load up too heavily on bonds at the moment, since interest rates will very likely start increasing in the next 6-12 months, which means that the price of existing bonds will decline.

Therefore, I would focus my search on ETFs that buy short-term bonds (corporate, treasury, or both) and maybe work in a bit of intermediate-term bonds. I would probably stay away from long-term bonds for the time being until interest rates (presumably) normalize over the next several years.

Best of luck.

Answer 2 · 2015-07-31 16:42:26

see this user

Charles J. Stevens, Principal, evergreen financial, LLC

@CharlesStevens • 07/31/15 This answer was first published on 07/31/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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Given the inevitability of an interest rate increase by the Federal Reserve sometime in the future, the best fixed income or bond investment currently would be an Exchange Traded Fund (ETF) made up of short term corporate bonds or short term US govenment obligations.

Retail (you and me) bond buyers are at a disadvantage price-wise when buying or selling bonds. Professional portfolio managers who manage funds or ETF's can get much better prices for their trades than you and I can. Also, unless you are investing multiple millions of dollars, the best way to invest in bonds is via the ETF's. The costs of assembling and maintaining these portfolios are, in most cases, lower than you will find in bond mutual funds.

If you are not familiar with ETF's, all the information you will need to make a wise investment can be found through the website www.etf.com, or on ETF websites such as iShares.com or ssga.com.

At the $100,000 level or above, you can also hire a professional portfolio manager to assemble and monitor a portfolio of taxable or non-taxable bonds for you. Costs to do that shold be 3/4 to 1 % of the money being invested charges annually.

Hope this has helped point you in the proper direction.

How to buy bonds?

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