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How to Buy Bonds
In most cases, investors purchase bonds—particularly corporate bonds—in the secondary market, meaning after the bond has already been issued. These purchases are typically made through a brokerage account. While many bonds can be traded directly through online platforms, certain issues may still require telephone trading, depending on the broker and the specific bond.
For a detailed explanation of the purchasing process, investors can consult guides specifically focused on how to buy bonds.
Unlike corporate bonds, some government bonds are also available directly to retail investors in the primary market at the time they are issued. For example, in the United States, individuals can participate in government bond auctions through TreasuryDirect, an online platform operated by the Bureau of the Fiscal Service within the U.S. Treasury Department. Through this system, investors can purchase securities such as U.S. savings bonds, Treasury Bills, Treasury Notes, Treasury Bonds, and Treasury Inflation-Protected Securities (TIPS) directly from the government.
Similar systems exist in other countries as well. In Italy, for instance, BTPs—government bonds linked to the Italian inflation rate—can be purchased online at issuance through home banking platforms with trading capabilities. These bonds can also be acquired at issuance through bank branches or post offices, along with other Italian government securities.
For investors seeking diversification, another option is to gain exposure to a portfolio of bonds through a bond exchange-traded fund (ETF). Buying a bond ETF works in the same way as purchasing a stock: investors simply place an order through their online brokerage account. Examples of widely traded bond ETFs include the iShares 1–3 Year Treasury Bond ETF (SHY) and the iShares 20+ Year Treasury Bond ETF (TLT).
Bond ETFs offer several advantages and drawbacks. When an investor buys an individual bond and holds it until maturity, the cash flow is generally predictable: the investor receives regular interest payments and the principal is repaid at maturity, assuming the issuer does not default. In contrast, bond ETFs do not have a fixed maturity date, and their market value can fluctuate depending on conditions in the secondary market, which makes their future selling price less certain.
What Else Should You Know About Bonds?
If you would like to expand your understanding before deciding on the appropriate bond allocation for your portfolio, it may be helpful to explore additional educational resources that cover bond investing in greater depth.
- What is a bond? (our main article in the bond section)
- What is a bond yield?
- How do bonds work?
- What happens when a bond comes due?
- How to invest in bonds?
- How to buy bonds?
- Where to buy bonds?
- How to buy treasury bonds?
- What is a government bond?
- What are convertible bonds?
- What are junk bonds?
- What is a secured bond?