The Basics of Exchange-Traded Bonds

Exchange-traded bonds are a type of debt instrument that you can purchase through an exchange much as you would a stock. Traditionally, bonds were difficult to obtain, and you had to have a special account with a bond broker. Thanks to the invention of exchange-traded bonds, the average investor can get involved much more easily.

Exchange-Traded Bonds

The New York Stock Exchange has a bond exchange that you can use to purchase individual bonds. You can purchase bonds in increments of $25. This allows more people to get involved. Previously, purchasing one bond cost much more than this. With exchange-traded bonds, you can get on your computer and purchase the bonds that you want depending on your investment needs.

What They Provide

This type of investment can be very enticing. These debt securities pay regular coupon payments based on the interest rates that the bonds pay. These investments are considered relatively safe because they are a type of debt issued by companies. If a company were to go into default, the company's assets would be used to repay the bondholders before the preferred stockholders of the company.

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