The basic steps to buy bonds at Fidelity
You can buy bonds through Fidelity in three main ways: through the Fidelity website or mobile app, by phone with a representative, or in person at a Fidelity branch. The process depends on what type of bond you want and whether you already have a Fidelity brokerage account.
If you have an existing Fidelity account, log in and navigate to the "Fixed Income" or "Bonds" section. Search for the specific bond by its CUSIP number (a nine-character identifier), ticker symbol, or issuer name. Review the bond details — including the coupon rate, maturity date, and current price — before placing your order. Fidelity will show you the yield to maturity and any fees involved.
If you do not yet have a Fidelity account, you will need to open one first. This takes about 10 minutes online and requires basic personal information, Social Security number, and initial funding. Once your account is open and funded, you can then search for and purchase bonds using the same process.
Key Takeaways
- You must have an open Fidelity brokerage account before you can buy bonds; opening one takes about 10 minutes and requires initial funding.
- Search for bonds by CUSIP number, ticker, or issuer name in the Fixed Income section of your Fidelity account.
- Fidelity shows you the coupon rate, maturity date, yield to maturity, and any transaction fees before you confirm your purchase.
- You can buy individual bonds, bond funds, or exchange-traded funds (ETFs) that hold bonds, each with different costs and liquidity.
- Fidelity charges no commission on most bond purchases, but some bonds carry a markup that is built into the price you see.
Understanding the three types of bonds you can buy
Fidelity lets you buy individual bonds, bond mutual funds, and bond ETFs. Each serves a different purpose and carries different costs.
Individual bonds are single debt securities issued by governments or corporations. You own the bond until maturity, receive periodic interest payments (the coupon), and get your principal back at the end. Fidelity has no commission on most individual bond purchases, though the price includes a markup that varies by bond type. Individual bonds are best if you want predictable income and plan to hold until maturity.
Bond mutual funds are pools of many bonds managed by a Fidelity fund manager. You buy shares of the fund, not individual bonds. The fund pays dividends from the interest it collects. Fidelity charges an annual expense ratio (typically 0.2% to 1% per year) and may charge a sales load (an upfront fee) depending on the fund class. Mutual funds are best if you want diversification without picking individual bonds yourself.
Bond ETFs are similar to mutual funds but trade like stocks on an exchange. Fidelity charges no commission to buy or sell most bond ETFs, and expense ratios are usually lower than mutual funds (often 0.05% to 0.3% per year). ETFs are best if you want low costs and the ability to buy or sell during market hours.
How to search for and evaluate a specific bond
Once you are in the Fixed Income section of your Fidelity account, use the search tool to find a bond. You can search by CUSIP number (the most precise method), ticker symbol, or issuer name. If you are looking for a Treasury bond, corporate bond, or municipal bond, Fidelity's search will filter results by bond type.
When you find a bond, Fidelity displays key information: the coupon rate (the annual interest percentage), maturity date (when you get your principal back), current price (what you pay now), and yield to maturity (your total return if you hold to maturity). The price is shown as a percentage of face value — a price of 102 means you pay 102% of the bond's $1,000 face value, or $1,020.
Pay attention to the bid-ask spread, which is the difference between what buyers will pay and what sellers are asking. A wider spread means less liquidity and a higher cost to buy or sell. Treasury bonds typically have tight spreads; less-traded corporate or municipal bonds may have wider spreads. Fidelity shows this information before you confirm your order.
What happens after you place a bond order
When you submit a bond order, Fidelity sends it to the market. For individual bonds, settlement typically occurs within two business days — meaning the bond is delivered to your account and the money leaves your cash balance. For Treasury bonds, settlement is usually one business day.
Once the bond settles in your account, you own it. If it pays interest (a coupon), Fidelity will deposit those payments into your account on the scheduled dates. You can hold the bond until maturity, sell it before maturity through Fidelity's Fixed Income platform, or let it mature and receive your principal back.
If you sell a bond before maturity, the price you receive depends on current market conditions — interest rates, credit quality, and demand. If rates have risen since you bought the bond, you may sell at a loss. If rates have fallen, you may sell at a gain. Fidelity charges no commission on the sale, but the bid-ask spread applies.
Fidelity's fees and markups on bond purchases
Fidelity charges no commission on most individual bond purchases. However, the price you see includes a markup — a small profit margin that Fidelity takes. The markup varies by bond type and market conditions. Treasury bonds typically have the smallest markups (often under 0.5%), while less-liquid corporate or municipal bonds may have larger markups (0.5% to 2% or more).
For bond mutual funds, you pay an annual expense ratio that covers the fund manager's costs. This ranges from 0.2% to 1% or higher per year, depending on the fund. Some funds also charge a sales load — an upfront fee of 1% to 5.75% — when you buy shares. Fidelity offers both load and no-load funds; check the fund prospectus to see which applies.
For bond ETFs, Fidelity charges no commission, and expense ratios are usually lower than mutual funds (0.05% to 0.3% per year). You pay a bid-ask spread when you buy or sell, just as with individual bonds, but the spread is typically very tight for popular ETFs.
Minimum investment amounts and account requirements
Most individual bonds have a minimum purchase of one bond, which typically costs between $1,000 and $5,000 depending on the bond's price. Some bonds may require a minimum of $5,000 or more. Fidelity displays the minimum for each bond before you order.
Bond mutual funds usually have a minimum initial investment of $500 to $2,500, depending on the fund. Some Fidelity funds have lower minimums if you set up automatic monthly contributions. Bond ETFs have no minimum investment beyond the price of one share, which can be anywhere from $20 to $100 or more depending on the ETF.
You must have a Fidelity brokerage account to buy any of these. If you have a Fidelity 401(k), IRA, or other retirement account, you can also buy bonds within those accounts using the same process, though some bond types may not be available in all account types.
Common mistakes to avoid when buying bonds
One frequent mistake is confusing the bond's coupon rate with its yield. The coupon is fixed when the bond is issued; the yield changes based on what you pay for the bond. If you buy a bond at a discount (below face value), your yield is higher than the coupon. If you buy at a premium (above face value), your yield is lower. Always check the yield to maturity before you buy.
Another mistake is ignoring the maturity date. If you need your money in three years, do not buy a 10-year bond unless you are willing to sell it early and accept whatever price the market offers. Longer bonds are more sensitive to interest rate changes, so their prices fluctuate more.
A third mistake is overlooking the bid-ask spread on less-liquid bonds. A wide spread can cost you 1% or more of your investment. If you are buying a small amount or a less-common bond, ask yourself whether the cost is worth it. Treasury bonds and popular bond ETFs have much tighter spreads.
Frequently Asked Questions
Do I need a minimum amount of money to open a Fidelity account and buy bonds?
Fidelity does not require a minimum opening deposit to open a brokerage account, though you will need to fund it before you can buy bonds. The minimum investment in a specific bond depends on the bond's price — typically $1,000 to $5,000 for individual bonds. Bond ETFs and mutual funds have lower minimums.
Can I buy bonds in a retirement account like an IRA?
Yes. You can buy individual bonds, bond mutual funds, and bond ETFs within a Fidelity IRA, 401(k), or other retirement account using the same process. Some bond types may have restrictions depending on your account type — for example, some employer 401(k) plans limit the bonds available. Check your plan documents or call Fidelity to confirm what is available in your specific account.
What is the difference between a bond's coupon rate and its yield to maturity?
The coupon rate is the fixed annual interest percentage set when the bond is issued. The yield to maturity is your total return if you hold the bond until it matures, accounting for the price you paid. If you buy a bond at a discount, the yield is higher than the coupon. If you buy at a premium, the yield is lower. Always review the yield to maturity before you buy.
Can I sell a bond before it matures?
Yes. You can sell any individual bond through Fidelity's Fixed Income platform before maturity. The price you receive depends on current market conditions — if interest rates have risen, the bond's price will be lower; if rates have fallen, the price will be higher. Fidelity charges no commission on the sale, but you pay the bid-ask spread.
What happens if the bond issuer defaults?
If a bond issuer cannot pay interest or return principal, you may lose some or all of your investment. This is why credit quality matters — Treasury bonds have virtually no default risk because they are backed by the U.S. government. Corporate and municipal bonds carry varying levels of default risk depending on the issuer's financial strength. Fidelity shows the bond's credit rating before you buy, which reflects this risk.