Buying Information of Bonds.

How to Buy Bonds

bonds are more of a pure loan. In effect, you lend money to a company or the government with the guarantee that you will get it back over time, in exchange for getting paid interest.

Instructions

STEP 1: Ask your financial adviser what types of bonds are available and who sells them. And which offers highest rate of return ,which is exempt from state and local taxes and other taxes, federal taxes.

STEP 2: Find out when the bond matures and how the interest payment is plannedA short-term bond matures in 3 years or less; an intermediate bond, in 5 to 12 years; a long-term bond, in 12 years or more. Interest can be paid monthly, quarterly or annually. You can select a bond that works according to your income needs.

STEP 3: Pay more concentration on bond's rating to find out how safe that bond is. A higher rating generally means a secure bond. And the higher the rating, the lower the interest rate; You may find a corporate bond with a lower rating and fairly good rate of return.important thing is how stable a company will be over the life of the bond so you can get your money back.

STEP 4: when interest rates go down, a bond issuer has the option of paying it off before the maturity date so that it can issue new bonds at a lower rate. You, as the investor, have your cash back, but you're faced with a lower rate of return if you reinvest the money.

STEP 5: Be very responsive of the risks involved. Interest-rate association can also work against bonds. If interest rates go up, the bond you are holding becomes less valuable than new bonds that get issued. In addition to call provisions, companies can also go bankrupt and default on their bonds, leaving bondholders with no interest or principal payments during the bankruptcy, and new bonds or a combination of stocks and bonds once the company exits bankruptcy protection.

STEP 6: Buy the bonds from a full-service broker, from a discount broker or online through a site like etrade.com. Just pick the bonds you want and place an order. You can buy Treasury bonds directly from the federal government at regularly scheduled auctions.

How to Buy Bonds Online

While buying bonds online is not as easy as buying stocks online, it is cheaper to buy them from Web sites than from retail brokers.

Instructions

STEP 1: Open an account with an online broker or dealer that sells bonds. Most dealers will require that you open an account with at least $5,000.

STEP 2: Deposit the required amount in the account by mailing a check to the broker .

STEP 3: Decide what type of bond you want to buy, then visit the Bond Market Association's Web site (bondmarkets.com) and check out yields and other features of bonds.

STEP 4: Check out other Web sites that list bond information, looking for the best total returns, not just the best yields.

STEP 5: Calculate a bond's "yield to call," or how much money you will get if you redeem early. The higher the yield, the more money you will make.

STEP 6: Indicate which bond you want to buy and how much you want to invest.

STEP 7: Keep in mind that the broker's commission is usually built into the bond price.

STEP 8: Get confirmation of the purchase. You should receive a trade confirmation by mail several days after the bond has been bought.

Tips & Warnings

*Shop and compare. Not all sellers may offer every available bond, nor will two sellers necessarily quote the same price for a bond. Waiting for the market to shift may also work to your advantage, but be aware that the same bond may not be available next week.

*Issuers are developing all sorts of innovative bonds to meet specific needs. For instance, the federal government now offers an inflation-indexed Treasury bond designed to adjust to changing inflation rates·

*If you don't have enough money to buy individual bonds or if you want a diversified, laddered portfolio of bonds, consider investing in a bond fund, or a mutual fund that focuses on bond investments.