Purchasing Corporate Bonds without a Broker

Purchasing corporate bonds has become a popular method of investment. Corporate bonds present a good opportunity for those who wish to diversify from an all-stock portfolio. The only way that many people know of to invest in bonds is through a bond broker. Here are a few alternative methods to consider for buying corporate bonds. 

Primary Source

When corporations need to raise money, one way that they can do so is by issuing bonds. These bonds can be purchased by investors who are willing to lend the company money. The company then pays that investor a specified rate of interest over the years that the bond is in place. 

Therefore, one way to buy bonds is simply to buy them directly from the source. However, this is not the easiest thing to do and is available for only certain investors. Initial offerings of bonds are typically taken care of by investment banks. These banks have the expertise to value the bonds properly and market them to investors. In order to buy bonds in this method, you will typically have to have a large investment account with an investment bank that offers the bonds. J.P. Morgan and Goldman Sachs are examples of investment banks that could handle a bond offering. In order to be able to purchase bonds in this manner, you will typically have to have a trading account with at least $100,000 to invest. This limits the ability of most investors to get involved with this method. 


One relatively new and simple method to buy and sell bonds is through the New York Stock Exchange Bonds Trading Platform. Using this method is very similar to trading stocks through the exchange. You can get access to the exchange and buy and sell corporate bonds whenever you want. You will be able to get real-time price quotes on the bonds that interest you and then make a purchase if you decide that the bond is worth having. This enables regular investors with less cash to get involved in the bond market without going through a bond broker. 

Why Avoid Brokers?

Some people are very satisfied to use bond brokers. However, there are points in favor of buying bonds without going through a broker. For one thing, with a bond broker, you typically have to start investing with $5000. If you do not want to put that much into bonds, you cannot get started with a broker. 

Besides that fact, you also have to contend with the broker's spread. The spread is the difference between what a broker buys a bond for and what he sells it to you at. You have no way of knowing how much the spread is. Therefore, you are potentially spending money that you do not need to spend. Buying bonds through other means could potentially save you quite a bit of money over the years.

blog comments powered by Disqus