You can buy corporate bonds through a brokerage account, directly from some companies, or through a bond fund
Corporate bonds are sold in three main ways: through a brokerage firm (the most common route), directly from the issuing company during a new bond offering, or bundled inside a mutual fund or exchange-traded fund. Most individual investors use a brokerage because it gives you access to both new bonds and existing ones already trading in the secondary market. You'll need a brokerage account to get your free guide, and the process is similar to buying stocks — you place an order, the firm executes it, and the bond settles in your account.
The choice between these routes depends on how much money you have to invest, how much time you want to spend researching individual bonds, and whether you prefer a hands-off approach. A single corporate bond typically costs $1,000 per bond, though some brokerages have lowered minimums. Bond funds let you invest smaller amounts and spread your money across many bonds at once.
Key Takeaways
- Most individual investors buy corporate bonds through a brokerage account, where you can search for bonds by issuer, maturity date, and yield.
- A single corporate bond usually costs $1,000, but some brokerages now offer fractional bond purchases or lower minimums.
- Bond funds and ETFs let you own pieces of many corporate bonds with a smaller upfront investment and automatic diversification.
- New bond offerings are sometimes available directly from the issuer or through your broker, often with no commission.
- Secondary market bonds (already issued and trading) may have wider price ranges and require more research than new offerings.
Opening a brokerage account to buy individual bonds
To buy corporate bonds, you first need a brokerage account. Most major brokerages — including Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, and Vanguard — offer bond trading. You'll open an account online by providing your name, Social Security number, address, and employment information. The process usually takes 10 to 15 minutes, and your account is typically ready to fund and trade within one business day.
Once your account is open and funded, you can search for corporate bonds using the brokerage's bond screener or trading platform. You'll filter by issuer name, maturity date (when the bond pays back its principal), credit rating, and yield (the interest rate you'll receive). The platform shows you the current price, which may be above or below the $1,000 face value depending on market conditions and the bond's age.
Commissions for buying bonds through a brokerage vary. Many brokerages charge no commission on new bond offerings, but may charge a small fee or markup on secondary market bonds — typically $10 to $25 per bond, though some firms build this into the price you see rather than showing it as a separate line item. Ask your broker about their fee structure before you trade.
Buying new corporate bond offerings
When a company issues new corporate bonds, they're often made available through brokerages with no commission. These offerings are announced in advance, and your broker will show them in a "new issues" or "offerings" section of their platform. You can review the bond's terms — the interest rate, maturity date, and any special features — before you commit your money.
New offerings are typically easier to research than secondary market bonds because the company publishes a prospectus, a detailed document that explains the bond's terms, the company's financial condition, and the risks. You can usually read this from your broker's website or request it directly. New bonds also tend to have tighter pricing, meaning less room for the broker to mark up the price.
The downside is that new offerings are available only during the offering period, which may last a few days or weeks. If you miss the window, you'll have to buy the bond on the secondary market later, where prices may have moved and commissions may explore.
Buying bonds on the secondary market
The secondary market is where bonds that have already been issued trade between investors. If you want to buy a bond that's no longer in its initial offering period, or if you want a specific maturity date or yield that isn't available in new offerings, you'll search the secondary market through your brokerage.
Secondary market bonds give you more choice — you can find older bonds with different terms, higher or lower yields, and various credit ratings. However, prices fluctuate based on interest rates and the issuer's credit quality. A bond that paid 4% when it was issued might now trade at a discount if interest rates have risen, or at a premium if rates have fallen. Your broker will show you the current "bid" price (what buyers are offering) and "ask" price (what sellers are asking), and you'll pay the ask price when you buy.
Secondary market bonds often carry a wider bid-ask spread than new offerings, meaning the difference between what you pay and what you could sell it for is larger. This is the broker's compensation for finding a seller and executing the trade. For this reason, secondary market bonds are better suited to investors who plan to hold them to maturity rather than trade them frequently.
Using bond funds and ETFs for smaller investments
If you don't have $1,000 to invest in a single bond, or if you want to own many bonds without researching each one individually, a bond fund or exchange-traded fund (ETF) is a simpler option. These funds pool money from many investors and buy a portfolio of corporate bonds. You buy shares of the fund, and each share represents a tiny piece of all the bonds inside.
Bond funds and ETFs offer several advantages: you can invest as little as $50 to $100 per share, you get when ready diversification across dozens or hundreds of bonds, and a professional manager or index tracks the bonds for you. You also receive regular income distributions as the bonds pay interest. The main drawback is that you pay an annual fee, called an expense ratio, which typically ranges from 0.05% to 0.50% per year depending on the fund.
Corporate bond ETFs are passively managed and track an index like the Bloomberg Corporate Bond Index, while actively managed bond funds employ a manager who picks individual bonds. ETFs tend to have lower fees and trade like stocks during market hours, while mutual funds are priced once per day after the market closes. Both are good choices for beginners or investors who prefer a hands-off approach.
Comparing costs and minimums across brokerages
| Brokerage | Minimum to Open Account | Commission on New Bonds | Commission on Secondary Bonds | Fractional Bonds Available |
|---|---|---|---|---|
| Fidelity | $0 | No commission | $1 per bond | Yes |
| Charles Schwab | $0 | No commission | $1 per bond | Yes |
| E*TRADE | $0 | No commission | $1 per bond | No |
| Vanguard | $0 | No commission | $1 per bond | No |
| TD Ameritrade | $0 | No commission | $1 per bond | No |
Most major brokerages have eliminated account minimums and offer no-commission trading on new bond offerings. Secondary market commissions are now standardized at around $1 per bond at most firms. The real difference between brokerages is the quality of their bond screener, the size of their inventory, and whether they offer fractional bonds (pieces of a bond that cost less than $1,000).
Fidelity and Charles Schwab currently offer fractional corporate bonds, which means you can buy a $500 piece of a bond instead of waiting to save $1,000. This feature is newer and not yet available everywhere, so check your broker's website to see if it's offered. If fractional bonds aren't available at your broker, bond funds remain your best option for investing less than $1,000.
Direct purchase programs and company websites
Some large companies offer direct purchase programs that let you buy their bonds without going through a broker. These programs are less common than they once were, but they still exist at companies like utilities and large industrials. You typically contact the company's investor relations department or visit their website to learn whether they offer direct purchases.
The advantage of a direct purchase program is that you may avoid brokerage commissions entirely. The disadvantage is that you have access only to that one company's bonds, you have less flexibility in choosing maturity dates and terms, and you'll need to manage the purchase and eventual sale yourself. For most investors, a brokerage account offers more choice and easier management.
Frequently Asked Questions
Do I need a certain amount of money to start buying corporate bonds?
Most corporate bonds cost $1,000 per bond, but some brokerages now offer fractional bonds for $500 or less. If you have less than $1,000, a bond fund or ETF is your best option — you can invest as little as $50 to $100 per share. There is no minimum to open a brokerage account at major firms.
What's the difference between buying a new bond offering and a secondary market bond?
New offerings have no commission, a detailed prospectus, and stable pricing during the offering period. Secondary market bonds offer more choice and flexibility but may have wider price spreads and commissions. If you're buying to hold to maturity, secondary market bonds work fine; if you plan to trade frequently, new offerings are usually cheaper.
Should I buy individual bonds or a bond fund?
Individual bonds are better if you have at least $1,000 to invest, want predictable income, and plan to hold to maturity. Bond funds are better if you have less money, want when ready diversification, prefer a hands-off approach, or want to trade in and out. Both are legitimate strategies depending on your situation.
Can I buy corporate bonds through my retirement account?
Yes. Most IRAs and 401(k) plans that offer self-directed brokerage windows let you buy corporate bonds. Some employer 401(k) plans have limited investment options and may not include individual bonds, but they often include bond funds. Check with your plan administrator or log into your account to see what's available.
What happens if the company that issued my bond goes bankrupt?
Bondholders are paid before stockholders in a bankruptcy, but you may not recover the full amount you invested. The company's assets are distributed according to a priority order set by law. This is why credit rating matters — higher-rated bonds from stable companies carry less bankruptcy risk than lower-rated bonds from weaker companies.