Where to Buy Bonds & Which Bonds to Buy: Everything You Need to Know

Increased stock market volatility underlines the importance of a diversified portfolio, particularly if you’re looking to generate a stable income. Bonds are a popular investment option for anyone looking to hedge against stock market volatility. If you already have a grasp of bond trading for beginners, how they work, and the advantages they bring, you’re probably wondering where to buy bonds and which bonds to buy.

This guide will outline the key stages of how and where to buy bonds, help you decide which ones to buy, and show you how to trade bonds through platforms like ActivTrades.

Where to Buy Bonds

When you’re ready to buy bonds, the first decision you’ll need to make is the platform or broker you will use. There are several options for purchasing bonds, but it’s important to select the one that’s the most appropriate for your needs. Factors to consider include ease of use, cost, and available bond options.

Here are some popular options:

1. Bond Brokers Bond brokers, like ActivTrades, provide platforms that allow you to access various types of bonds. Brokers generally offer a user-friendly interface that enables investors to easily search, trade, and manage bonds. Brokers typically provide access to a range of bonds, including government bonds, corporate bonds, and municipal bonds.
2. Government Websites It’s also possible to purchase government bonds directly from government websites, such as the Treasury Direct platform in the U.S. or National Savings & Investments in the UK. These websites often sell bonds at face value without the need for an intermediary. While this may reduce transaction fees, a broker will generally provide greater flexibility and ease of access to a variety of bonds.
3. Banks and Financial Institutions Many banks and other financial institutions offer bonds, particularly government bonds, to their clients. While this can be a convenient way to buy bonds, it may not always provide the best prices or the widest selection. Before buying bonds, it is always good practice to compare prices between banks and bond brokers.
4. Exchange-Traded Funds (ETFs) ETFs can give investors exposure to a basket of bonds for instant diversification. Bond ETFs can be purchased on stock exchanges, just as you would purchase stocks. Bond ETFs can be a good option for beginners who want to purchase a diversified bond portfolio without buying individual bonds. Many brokerages offer bond ETFs for trading.
5. Bond Funds Like bond ETFs, bond mutual funds pool investor money to invest in a collection of bonds. You can then purchase bond funds through your brokerage account. Professional fund managers manage bond funds, which can be beneficial for anyone new to investing in bonds.

How to Choose a Bond Trading Platform

There are a number of factors to consider when selecting a bond trading platform. These typically include:

1. Transaction Fees Different brokers charge varying fees for bond trades, so it’s important to compare costs.
2. Bond Selection Choose a broker that provides the types of bonds you're interested in, whether government, corporate, or municipal.
3. Research Tools A good platform should offer tools to help you analyse the bonds you're interested in and track their performance.
4. User Friendly A platform that is easy to navigate will make trading bonds simpler, especially if you’re a beginner. ActivTrades provides a user-friendly interface, with expert support and a wide range of investment options.

Which Bonds to Buy

Once you know where to buy bonds, the next question is: Which bonds should I buy?

The right bond for you depends on your investment goals, risk tolerance, and time horizon. There are many options, so it’s important to do your own research.

Here is a quick rundown of some of the more common types of bonds available on the market:

U.S. Treasury Bonds

Treasury bonds are some of the safest bonds you can buy, as they are issued by the U.S. government. They are available for various terms, including 10-year, 20-year, and 30-year bonds. They offer steady interest payments and are ideal for cautious investors.

You can buy U.S. Treasury bonds directly through Treasury Direct or purchase them via platforms like ActivTrades, which allow you to trade bonds alongside other assets.

Some examples of treasury bonds include:

1. 10-Year Treasury Note: This is a popular option for investors seeking moderate returns with low risk.
2. 26-Week T-Bills: These are short-term bonds that offer quick liquidity with minimal risk.

Where to buy US Treasury bonds? Treasury direct, brokerage platforms like ActivTrades, or via ETFs.

Corporate Bonds

Companies issue corporate bonds to raise capital. They typically offer higher interest rates than government bonds but can come with increased risk. Corporate bonds are rated by agencies like Moody’s or S&P, which helps you assess their creditworthiness.

Investment-grade corporate Bonds are issued by companies with strong credit ratings and are considered safer than other types of corporate bonds. They are ideal for those looking for a balance of yield and safety.

Corporate bonds can be purchased through a broker platform that offers options from companies across various industries.

Some examples of corporate bonds include:

1. iShares iBoxx Investment Grade Corporate Bond ETF: This invests in high-quality corporate bonds.
2. Vanguard Short-Term Corporate Bond Index Fund: This provides exposure to short-term corporate debt.

Where to buy corporate bonds? You can buy corporate bonds via broker platforms such as ActivTrades, from the issuer (i.e. Vanguard or Fidelity), or major banks.

Municipal Bonds

Municipal bonds issued by local governments are relatively low-risk investments. They are often tax-exempt to encourage investment, which can make them useful additions to a portfolio for high-income investors.

An example of a municipal bond includes:

1. Vanguard Tax-Exempt Bond ETF: this fund invests in investment-grade municipal bonds from issuers that are primarily state or local governments or agencies whose interest is exempt from U.S taxation.

Where to buy municipal bonds? Brokerage and investment platforms, such as ActivTrades, or via ETFs offer municipal bonds.

Bond ETFs and Bond Funds

Bond ETFs and mutual funds are excellent options for diversification and a simpler way to invest in bonds. These funds pool money from multiple investors to buy bonds from various sectors. Bond ETFs can be traded on exchanges, making them convenient ways to buy and sell bonds.

Examples of Bond ETFs and Bond Funds include:

1. Guggenheim Total Return Bond Fund: This is an actively managed fund that provides exposure to different bond sectors.
2. Vanguard Total International Bond Index Fund: This is great for investors looking for international bond exposure.
3. Fidelity Short-Term Bond Fund: This fund is ideal for investors seeking liquidity and stability.

Where to buy bond ETFs and funds? Via broker platforms such as ActivTrades, or direct from the issuing company.

Buying Bonds from Other Countries

Many investors buy bonds from foreign countries to further diversify their portfolios or take advantage of different interest rates. Can you buy bonds from other countries? What do you need to consider before doing so?

It’s perfectly possible to add foreign bonds to your investment portfolio, but there are associated risks:

1. Currency Risk If you’re investing in bonds issued in a foreign currency, fluctuations in the currency exchange rate could impact your returns.
2. Political and Economic Risk The stability of a country’s economy and political situation can affect the value of bonds, so this is important to consider.
3. Liquidity Risk

Depending on market conditions, foreign bonds might not be as easily tradable as domestic bonds. If you need to access funds quickly, that may not be possible.

Despite these risks, foreign bonds can sometimes offer attractive returns, particularly if interest rates are higher in other countries. Careful research is essential before purchasing foreign bonds to assess the risks associated with any bond and the country in which it’s issued.

How to Trade Bonds with ActivTrades

ActivTrades makes it simple to trade bonds. Its easy-to-use platform provides access to a wide range of bonds, including government and corporate bonds, making it straightforward for beginners and experienced investors alike.

Here’s a step-by-step guide to trading bonds with ActivTrades:

1. Open an Account Start by creating an account on the ActivTrades platform. Before trading, you’ll need to provide some basic information and identity verification.
2. Deposit Funds Once your account is set up, you can deposit funds into your account using your preferred payment method.
3. Research Bonds You can use the platform’s research tools to explore different bonds and assess their suitability for your portfolio.
4. Place a Trade You can order directly on the platform once you’ve selected the bonds you wish to invest in.
5. Monitor Your Investments You can track the performance of your bond investments via the ActivTrades dashboard.

Summary

Buying bonds can be an essential part of building a diversified investment portfolio for many investors.

Whether you're looking for safe government bonds, higher-yielding corporate bonds, or tax-advantaged municipal bonds, plenty of options are available. ActivTrades makes it easy to trade bonds with accessible tools and research at your fingertips.

Before investing in bonds, assessing your financial goals, risk tolerance, and overall time horizon is essential.

Are you ready to start investing in bonds?

Sign up for an account today.

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