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Buying Bonds Over the Internet

By JLP | February 13, 2006

Interested in buying bonds? Here are some places you can find them on the internet:

Fidelity.com – allows individuals to buy and sell bonds basically the same way you buy stocks.
TreasuryDirect.gov – The U.S. government website that allows people to buy a range of government debt online without fees or paperwork. They have sold more than $2 billion in Treasurys to invdividual investors.
BondsforLess.com – Website owned by Zions Bancorp, a small Salt Lake City bank.

Other Resources:

To learn the basics of bonds, visit InvestinginBonds.com, a website sponsored by The Bond Market Association.

For bond prices and yield comparisons, check out BondSearch123.com, which is sponsored by JB Hanauer & Co., and BondsOnline.com. Also, Fidelity.com and InvestinginBonds.com offer pricing information.

There was a really good article about bonds ($)by Serena Ng in this weekend’s Wall Street Journal.

Topics: Bonds | 4 Comments »


4 Responses to “Buying Bonds Over the Internet”

  1. kurt Says:
    February 14th, 2006 at 8:54 am

    I don’t understand why any individual investor would want to own a given bond issue. It seems to me that you can get better retrusn and more diversification (and thus protection) by going with a bond mutual fund.

  2. Jose Says:
    February 14th, 2006 at 10:01 am

    Great advice.
    I only hoped the list was longer. But it is fairly good.

    I like to buy individual bonds, no bond funds. In the worst case, I can just keep them forever. Bond funds tend to make crazy and terrible sales midway to try to outperform the bond market.

  3. rarely right Says:
    February 14th, 2006 at 4:11 pm

    Kurt,

    I’ll take a swing at that one. Diversification is not always a requirement for protection in bond investing. Especially if the client is investing in US Treasuries or even AAA rated bonds where there is little or no benefit to diversifying for credit risk purposes. Iow, what’s the credit risk of putting millions of dollars into a US Treasury? The printing press could break i guess.

    Thus, individual issues which are usually bought in a laddered structure make a good alternative to bond funds. Of course there is more risk than just credit risk in bond investing, but credit risk is one of the two biggies.

    Just to name two of the problems with bond funds think about the second of the big risks – interest rate risk – and expenses. When interest rates go up bond values go down, which means potential loss of principal. Since the mutual fund shareholder has no control over the fund manager the shareholder is at risk of the fund manager realizing bond losses in an attempt to redeploy into higher yielding bonds. Translation? Permanent loss of capital via bond fund investing. In contrast, a buyer of individual bonds can hold until maturity to realize payback of principal

    Low cost bond funds can be a good choice, but many bond funds charge 1% or more. In an environment where bond yields are only 4% shareholders are looking at paying out 25% of their return. Imho, one must analyze expenses and all types of bond risk before committing to a bond fund.

    I just realized this post opens up more questions than it answers. Whee!

  4. kurt Says:
    February 14th, 2006 at 7:45 pm

    You’re right on all counts. I should have mentioned that i was thinking an indexing bond fund like the array Vanguard offers. That mitigates the risks you mention while still allowing for the benefits I mentioned.

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