How to Buy Bonds on E-Trade
Using E-Trade to buy bonds will help save you money on brokerage fees in a simple process that anyone can do. Purchasing bonds via E-Trade is relatively easy, but selecting the bonds that are most appropriate for your needs can be tricky.
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Instructions
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Go to E-Trade's Bond Fund Selector, where three columns of choices will appear. These will select bonds within time frame, investment risk tolerance and tax structure.
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Select "View Our Recommendations" and review the list of bonds that meet your criteria.
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Review the Morningstar and Credit Ratings confirming that the offerings meet your investment objectives. Five Stars in Morningstar and AAA are the top ratings a bond can hold.
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Review the Minimum Order and Transaction Fee requirements of the bonds you are interested in. Treasury Auctions and Secondary offerings have no fees. Online Secondary Trades are $1 per bond with a minimum of $10 and a maximum of $250.
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Review all information regarding the issue. A bond may have a "call" feature, which allows the bond issuer to recall the bond back on a certain date, paying you face value but not the rest of the interest that would have accrued for the remainder of time until the maturity date.
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Once you have picked your bonds, select them and place the order. You will be asked to confirm your order and given a confirmation number.
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Tips & Warnings
When you buy the bond, you are saying you will hold it until the maturity date or then sell it for market value, which may be less than the face value, so be certain of the time frame. In general, if interest rates are going down, your market value will go up. If rates rise, your market value goes down. E-Trade also has professional advisory services capable of offering portfolio reviews.
