You can buy corporate bonds through a broker, directly from some issuers, or through bond funds, but the method depends on the bond type and the amount you want to invest
Most individual investors buy corporate bonds through a brokerage account — the same type of account used for stocks. You search for the bond by its ticker or issuer name, see the current price and yield, and place an order just as you would for a stock. The broker handles settlement, meaning they collect your money, deliver the bond to your account, and handle the paperwork.
Some corporations also sell bonds directly to the public through their own offerings, though this is less common than broker purchase. A few large issuers run direct purchase programs, but you typically need to contact the company's investor relations department to learn whether they offer this option. Direct purchase usually requires a minimum investment of $1,000 to $5,000 per bond.
If you want to own corporate bonds but do not want to pick individual ones, you can buy shares in a bond fund or bond exchange-traded fund (ETF) that holds a portfolio of corporate bonds. This approach spreads your money across many bonds and removes the need to research individual issuers.
Key Takeaways
- Most individual investors buy corporate bonds through a brokerage account by searching for the bond by issuer name or ticker and placing an order at the current market price.
- Corporate bonds trade on the secondary market, meaning you are buying from other investors or dealers, not directly from the issuer in most cases.
- You will see the bond's coupon rate (the interest payment), maturity date, and current yield displayed before you buy, so you can compare options.
- Bond funds and ETFs let you own corporate bonds without selecting individual bonds, though you pay an annual fee for professional management or index tracking.
- Minimum investments vary: individual bonds often require $1,000 to $5,000 per bond, while bond funds may have lower minimums or none at all.
Opening a brokerage account and finding bonds to buy
To buy corporate bonds through a broker, you first need a brokerage account. Most major brokers — including Fidelity, Charles Schwab, E*TRADE, and Vanguard — offer bond trading. You open an account online by providing your name, Social Security number, address, and employment information. The broker verifies your identity and funds the account, usually within one to three business days.
Once your account is funded, you log into the broker's platform and navigate to the fixed income or bonds section. You can search by the issuer's name (for example, "Apple" or "Microsoft"), by ticker symbol if you know it, or by filtering for bonds that match your preferences — such as bonds maturing in a specific year or paying a certain interest rate. The platform shows you the current bid price (what you would pay to buy) and ask price (what sellers are asking), along with the coupon rate, maturity date, and current yield.
The current yield is different from the coupon rate. The coupon rate is fixed when the bond is issued — for example, 4.5% per year. The current yield changes based on the market price. If you buy a bond at a discount (below face value), your current yield will be higher than the coupon rate. If you buy at a premium (above face value), your current yield will be lower. The broker displays both so you can see what you are actually earning.
Understanding secondary market pricing and what you pay
Most corporate bonds trade on the secondary market, meaning you are buying from another investor or a dealer, not from the corporation itself. This is why the price fluctuates. When interest rates rise, existing bonds become less attractive, so their prices fall. When interest rates fall, existing bonds become more attractive, so their prices rise.
The price you see on your broker's platform is quoted as a percentage of face value. A bond quoted at 102 means you pay 102% of the $1,000 face value, or $1,020. A bond quoted at 98 means you pay $980. You also pay accrued interest — the interest that has accumulated since the last coupon payment date. If the bond pays interest twice a year and you buy it halfway through a coupon period, you pay the seller for the interest they have earned up to that point. Your broker adds this to the total cost automatically.
The bid-ask spread — the difference between what buyers are willing to pay and what sellers are asking — varies depending on how actively the bond trades. Bonds issued by large, well-known companies tend to have tighter spreads, meaning lower costs to buy and sell. Bonds from smaller or newer issuers may have wider spreads, so you pay more to enter and exit the position.
Minimum investment amounts and settlement
Individual corporate bonds typically have a face value of $1,000, and most brokers allow you to buy in increments of $1,000. Some brokers have a minimum order of one bond ($1,000), while others may require $5,000 or more. Check your broker's specific rules before you open an account if you have a limited amount to invest.
When you place an order to buy a bond, the broker does not settle it when ready. Settlement — the point at which money leaves your account and the bond arrives in your name — typically occurs two business days after the trade date. During this time, the broker is arranging payment and delivery. You do not need to do anything; the broker handles it automatically.
Once the bond settles, it appears in your account and you own it. You will receive coupon payments (interest) on the dates specified in the bond's terms, usually twice a year. The payments are deposited directly into your brokerage account as cash, which you can reinvest, withdraw, or hold.
Buying bonds directly from the issuer
Some corporations offer bonds directly to individual investors, bypassing the broker entirely. This is most common for large, creditworthy companies that want to reduce their own borrowing costs by selling directly. Direct offerings are advertised on the company's investor relations website or through financial news outlets.
To buy directly, you contact the company's investor relations department or the transfer agent they have hired to manage the offering. You complete an process, provide proof of identity and funds, and submit your order. Minimums for direct purchase are typically $1,000 to $5,000 per bond, and settlement takes five to ten business days.
The advantage of direct purchase is that you avoid broker fees and may get a slightly better price since there is no middleman. The disadvantage is that direct offerings are rare and often available only for a limited time. Once the offering closes, you can only buy those bonds on the secondary market through a broker.
Bond funds and ETFs as an alternative to individual bonds
If you do not want to research individual corporate bonds or do not have enough money to diversify across multiple bonds, you can buy shares in a bond fund or bond ETF. These funds pool money from many investors and use it to buy a portfolio of corporate bonds. A fund might hold 50 to 500 different bonds, spreading your risk across many issuers.
A mutual fund is managed by a professional who selects bonds based on the fund's stated strategy. An ETF typically tracks an index — a predetermined list of bonds — and does not require active management. Both types charge an annual fee, called an expense ratio, which is deducted from your returns. Expense ratios for bond funds range from 0.05% to 1% per year, depending on the fund type and manager.
You buy fund shares through the same brokerage account you would use for individual bonds. The minimum investment is often lower than for individual bonds — sometimes as little as the price of one share, which can be $10 to $50. You can also set up automatic investments, buying shares on a regular schedule. When the fund receives coupon payments from its bonds, those payments are reinvested or paid to you as distributions, depending on the fund's structure.
The trade-off is that you do not control which bonds the fund holds, and you pay an annual fee even in years when the fund loses money. However, for investors with less than $10,000 to $20,000 to invest, a bond fund often provides better diversification and lower costs than buying individual bonds.
Comparing costs: individual bonds versus bond funds
| Factor | Individual Corporate Bonds | Bond Funds / ETFs |
|---|---|---|
| Minimum investment | $1,000 to $5,000 per bond | Often $0 to $50 per share; varies by broker |
| Upfront cost | Bid-ask spread (typically 0.5% to 2%) | No upfront spread; buy at market price |
| Ongoing cost | None (except if you sell before maturity) | Annual expense ratio (0.05% to 1%) |
| Diversification | You control which bonds; requires research | Automatic diversification across many bonds |
| Interest payments | Coupon payments on set dates | Distributions (frequency varies by fund) |
| Maturity date | Fixed; you know when you get your principal back | None; fund exists indefinitely |
What happens after you buy: holding and selling bonds
Once you own a corporate bond, you have two choices: hold it until maturity or sell it before maturity. If you hold until maturity, you receive all coupon payments on schedule and get your full $1,000 face value back on the maturity date, regardless of what the bond's market price is at that time. This is the simplest approach and requires no monitoring.
If you need to sell before maturity, you place a sell order through your broker just as you would for a stock. The bond sells at the current market price, which may be higher or lower than what you paid. If interest rates have fallen since you bought the bond, you may sell at a profit. If interest rates have risen, you may sell at a loss. You also receive any accrued interest from the last coupon payment date to the sale date.
Selling before maturity introduces market risk — the risk that you will have to sell at an unfavorable price. This is why corporate bonds are often described as "buy and hold" investments. If you think you might need the money in the next few years, a bond fund may be a better choice because you can sell shares at any time without worrying about market timing.
Frequently Asked Questions
Do I need a special account to buy corporate bonds?
No. You buy corporate bonds in a regular brokerage account — the same type you would use for stocks. You can also buy them in a retirement account like an IRA or 401(k), depending on what your plan or broker allows. Some brokers offer separate bond trading platforms, but the account type is the same.
What is the difference between the coupon rate and the yield?
The coupon rate is the fixed interest rate the issuer promised when the bond was issued — for example, 4% per year. The yield is what you actually earn based on the price you pay. If you buy a bond at a discount, your yield is higher than the coupon. If you buy at a premium, your yield is lower. Your broker shows both so you can compare bonds fairly.
Can I buy corporate bonds with a small amount of money?
Individual bonds typically require $1,000 to $5,000 per bond, which may be more than you want to invest at once. Bond funds and ETFs are a better option for smaller amounts — you can often buy shares for $10 to $50 each, and some brokers have no minimum. This lets you own corporate bonds with less money upfront.
What happens if the company goes bankrupt after I buy the bond?
If a company defaults on its bonds, you do not lose your money when ready. Bondholders have a claim on the company's assets before stockholders do. In bankruptcy, the company's assets are sold and the proceeds go first to bondholders, then to stockholders. You may recover some or all of your investment, but it can take years. This is why bond ratings matter — they reflect the risk of default.
Should I buy individual bonds or a bond fund?
Individual bonds work well if you have at least $10,000 to $20,000 to invest, want to know exactly when you will get your money back, and are willing to research issuers. Bond funds work well if you have less to invest, want automatic diversification, or prefer not to pick individual bonds. There is no single right answer — it depends on your situation and preferences.