Learning how to buy bonds can be valuable for an investor. As one of the safest forms of investment available, bonds make a great addition to a diversified portfolio. Here are the basics of how to purchase bonds. 

Corporate Bonds

One form of bond that you can buy is a corporate bond. With this form of bond, you are actually lending money to a particular company. When corporations need to raise money, they can issue corporate bonds to investors. Investors will pay a certain amount of money for the bond and receive the promise of regular interest payments in return. The company will pay them interest for the length of the bond term and then give them their initial investment back. 

There are two main ways to invest in corporate bonds. You can buy them when they are initially offered from a company, or you can buy them from investors on the secondary market. To purchase a bond directly from the company when they are offered is not simple. Most of the time, the general public will not have access to this process. It helps to know a banker that is part of the initial offering. 

The other method to buy a corporate bond is in the secondary market. This is quite a bit simpler and more readily available to everyone. To buy a bond through this method, you can go through a bond broker or purchase it over an exchange. The New York Stock Exchange has a bond exchange that you can buy from. This is the simplest method to purchase a corporate bond and does not require any inside information. 

Treasury Bonds

Another type of bond that is available for purchase is the Treasury bond, which is issued by the United States Treasury. When you purchase a Treasury bond, you are essentially lending your money to the federal government for a certain amount of time. In exchange, the government pays a defined amount of interest over the life of the bond. 

Purchasing this type of bond is very simple compared to purchasing a corporate bond. You can buy Treasury bonds at banks, financial institutions and online. If you want to purchase a bond in person, you can visit your local bank to do so. You will have to fill out a basic form that requests the bond. You will have to give them your full name and your Social Security number. The form is then sent to the Treasury, and they register the specific bond to your Social Security number. Then they will send the bond to you through the mail. 

If you want to purchase a Treasury bond online, you can do so at their website. In order to purchase with this method, you will have to open an account with the Treasury. Fund the account and then place your order. They will then keep the bond digitally in your account for you until you decide to cash it in. 

blog comments powered by Disqus
Scottrade