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Easton Nguyen
Easton Nguyen

Bond Buying Guide



Learning how to buy bonds is an essential part of your education as an investor. A well-diversified portfolio should always strike a balance between stocks and bonds, helping you ride out volatility while still capturing growth along the way.




bond buying guide


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Buying individual bonds offers unique challenges. In addition to a wide range of moving parts inherent in each bond, the primary market can be difficult to access for all but the wealthiest investors. Meanwhile, the secondary market has less transparent pricing than primary issues.


The easiest way to buy bonds is to invest in bond mutual funds or bond exchange-traded funds (ETFs). Funds own large, diversified fixed-income portfolios comprising hundreds or even thousands of bonds.


Buying individual bonds via your brokerage account is more complicated. Typically online brokers offer access to bond secondary markets, which means that availability and prices wholly depend on existing holders looking to sell.


Bond ETFs can be purchased through any standard investment account listed above, like an investment company, an online broker or a financial advisor. Be sure to do your research on the best bond ETF options before you decide which way to go.


This page focuses on buying for yourself or a child whose account is linked to yours. If you are planning to give a savings bond as a gift, also see our page on Giving savings bonds as gifts. You can print a certificate announcing your gift. See our selection of announcement cards.


In any one calendar year, you may buy up to $10,000 in Series EE electronic savings bonds AND up to $10,000 in Series I electronic savings bonds for yourself as owner of the bonds. That is in addition to the amount you can spend on buying savings bonds for a child or as gifts.


The money your employer sends each time goes into a special Payroll Savings Plan Certificate of Indebtedness (C of I) in your TreasuryDirect account. Every time the balance in that specific C of I is large enough to buy the bond you chose at the amount you chose, we issue you that type of savings bond for that amount.


For example: If you want to buy $50 Series I savings bonds and you ask your employer to send $25 from each paycheck to your TreasuryDirect account, we issue a $50 bond for you after every other payday. You don't have to think about it again or do anything else. You keep getting more savings bonds automatically until you change or end your Payroll Savings Plan.


We may issue multiple bonds to fill your order. The bonds may be of different denominations. We use $50, $100, $200, $500, and $1,000 bonds. Again, the amount of your purchase can be any multiple of $50, from $50 to $5,000. You need to tell us only the amount. We determine denominations.


On Form 8888, you also specify who will own the bonds. That means, you can give paper savings bonds to yourself or to anyone else (as a gift). If you have enough money in your refund, you can buy multiple bonds and, if you wish, you can give them multiple registrations.


Most online brokerages sell Treasury bonds, corporate bonds and municipal bonds. Brokers like Fidelity, Charles Schwab, E*TRADE and Merrill Edge offer extensive bond listings. However, the purchasing process through an online brokerage is nowhere near as straightforward as through Treasury Direct. Bond prices vary from brokerage to brokerage, thanks to transaction fees and markups or markdowns.


States, cities and local governments issue municipal bonds. The safety of these bonds varies. In some instances, a municipal bond may be insured. In that case, an insurance company will have to make good on the bond if the municipal defaults.


Having a mix of bonds and stocks in your portfolio is a great way to take advantage of the benefits of diversification. In short, your portfolio will contain both the relative safety and stability of bonds, while taking potentially money-making risks with stocks.


In addition to the Treasury, corporate, and municipal bonds described above, there are many other bonds that can be used strategically in a well-diversified, income-generating portfolio. Analyzing the yield of these bonds relative to U.S. Treasuries and relative to comparable bonds of the same type and maturity is key to understanding their risks.


I have been buying TIPS aggressively since mid-2022 and I will keep buying the 5- to 15-year maturities as long as real yields continue at high levels. But I will also buy I Bonds in 2023. Inflation protection is a handy thing, as shown in the last two years when inflation suddenly and unexpectedly ran at 7+% annually.


I have used LLCs to load up on I bonds at attractive rates. They are easy to set up and inexpensive in many states. The treasury department challenged my strategy last year and when I provided them with the documentation they said that everything is fine. I still have their emails.


Buy the a $10,000 gift bond for each other (spouses) and just hold it in your gift box. As long as you do not actually gift it to the other person then it does not count toward the $10,000 the other person can buy that year. When a year occurs that you do not plan to buy I-bonds, then gift (transfer) the bond being held in the gift box at that time. In addition, the 5 years for holding the bond (to avoid 3 month interest penalty) will start when you purchase them, not when you actually gift (transfer) them. This was advice I got on the phone from a representative at Treasury Direct.


In the long run, you will earn exactly the same return if you start in January or start in April. Someone buying in April could be investing in a 3-month Treasury, now earning an annualized 4.69%. There is no penalty to waiting. The potential advantage is that you can scope out the possibility of a higher fixed rate. But, in reality, buying in January is perfectly fine, if that is your choice.


I am doing exactly this. I put the money that will likely go into I bonds into a three-month treasury that matures in late April. Then I will roll the funds into I bonds and in essence double dip for the month of interest. It also gives me the flexibility to do something other than I bonds if the new rate is unattractive. Grab a little extra interest and preserve flexibility.


if the fixed component must always be at least the inverse of the negative component, we could see a high fixed component over the next few resets. The YoY changes in CPI could get to exceedingly negative. Since the fixed component stays with that bond forever, the composite rate could look pretty good if inflation turns the other way.


I just want to confirm that you can cash out a portion of an Ibond. Can I buy a $5,000 bond and cash it out a $1,000 at a time or do I need to buy 5 $1,000 bonds? It looks like I can buy big and piece meal out to me.


Hello. New to your very interesting blog.Also new to I bonds. Bought $20K last year (I have an EIN).Question. I just divide $20k by 12 and buy that much every month.Any problems with that approach?My intent is to diversify my holdings and accumulate for at least a decade.Thanks!


I want to thank you for this article. I was able to finally understand the pricing of TIPS and knew what to expect. I purchased the 10/15/2027 bond on the secondary market on the last day of trading for 2022 and received a real yield of 1.655.


My not-so-simple guide this year will include partial gift presentations to position some of the gift bonds I purchased last year with 0% fixed rate, while still preserving some of the $10,000 limit for myself and spouse. Doing it in April and October seem the best options to make informed decisions.


I have an extensive portfolio of I bonds built in 2022 using LLCs set up for the purpose of being the registrant for I bonds. In my opinion, it is not as simple as comparing the 0.4 fixed rate to the real yield on TIPS. I bonds look backward at inflation, TIPS look forward. In a period of declining inflation, as we have now, I Bonds have an advantage. In flat or rising inflation Tips have an advantage. My I Bonds have a fixed rate of zero. When the rate gets to the point where the payback is two years or less I will roll them either to new I Bonds or TIPS depending on the inflation trajectory and available rates. With the fixed rate at 0.4 that would be when the variable rate hits 3.2.


Fixed rate is everything with I bonds,imho. I have some old ibonds with a high fixed rates. After years of compounding the fixed rate is 99% of the return. I m with you, my lo to zero fixed rate will be the first to go!


I am a little confused. If the May adjust to 0% variable rate and assuming the fixed rate does not changed from .4%, does that mean I am getting almost 0% for my balance in the I bond account or any new investments from May? Should I just withdraw then?


STRIPS are created from coupon-paying Treasurys and are not available as new issues. The market is fairly liquid, but the bid-ask spread can be significant for long-maturity issues. Thus, these are best held to maturity, and they work great in bond ladders. You can buy STRIPS at most brokerages that sell Treasurys (e.g., Vanguard, Fidelity, Schwab).


The drawback is that municipal bonds are more likely to default than treasury bonds. Case in point: Detroit defaulted on its bonds in 2013. Plus, municipal bonds typically have to be purchased through a broker who takes a small cut/commission. And finally, muni bonds typically sell in increments of $1,000.


And unlike buying directly from the Treasury, buying bonds on a brokerage app lets you tap into both the primary and secondary markets. That means you can buy bonds directly from the issuer at the true face value, or you can buy them from other investors looking to sell theirs either at a premium or below face value, depending on how popular those bonds are.


You may be tempted to sort your bond options by the highest yield/interest rate/coupon rate, but keep in mind that high interest rates are usually a direct reflection of the risk of the bond issuer defaulting. 041b061a72


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