How to Vet Your Bond Investor

To vet your bond investor you need to arm yourself with knowledge not only about the bond you might purchase but also the salesman through whom you are buying your bond.

Knowing the Cost of Your Bond

Your bond investor, or the salesman who is selling you a bond, can mark up the bond any amount. In other words, if a bond costs $200, one salesman will charge you $202, or a 1 percent markup. Another salesman might charge you $210, a 5 percent markup. But there are some salesmen who will try to get away with much higher percentages, 20 percent is not unheard of.

It’s up to you to know what the bond costs. You can check online to find out the range at which the bond is trading without markup. One such site is investinginbonds.com.

Knowing Who Charges What

You can also use the internet in another way to vet your bond investor by finding out the spread between the bond’s trading price and the sales price. Examples of some of the widest spreads are available at municipalbonds.com

What is an Acceptable Markup?

According to those knowledgeable about bond sales, a markup of 1 percent to 2 percent is an acceptable range. Much more than that and you are loading up the bond with costs you’ll have to recoup by the bond’s performance.

Investing successfully is challenging enough without paying higher-than-necessary fees and making it harder.



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