How to Buy Domestic Bonds

There are many different types of domestic (U.S.) bonds. These include government, municipal and corporate issuance. Each type of issuer has several sub-types of bonds, which are a function of maturity, yield and other options such as callability and risk.

Instructions

1. Review the sub-types of government domestic bonds. Government bonds are bills (securities maturing in less than one year), notes (securities maturing in one to 10 years) and bonds (securities maturing in more than 10 years). They are regarded as having the lowest risk/reward profile; that is, the risk is low and so is the return.

2. Review the features of domestic municipal bonds (munis). These are next in terms of risk. Munis are often free from federal and state taxes.

3. Review the features of corporate bonds. Corporate domestic bonds offer the highest risk/reward profile. Any company can issue bonds depending on the market. Short-term bonds are less than 5 years, and long-term bonds are over 12 years.

4. Contact your broker and decide on the amount you would like to invest. Once you know what type of domestic bond you would like to purchase, contact your broker. This can be either a full-service or discount broker. They will provide you with specific securities in your price range and let you know whats needed in order to fund the account. You can also contact a bond broker, but these specialized agents usually require a high initial deposit.

5. Buy directly from the U.S. You can also buy government domestic bonds directly from TreasuryDirect. All transactions and interest payments will be performed electronically (see Resources).

References

• Investorwords: Definition of Domestic Bond
• SIFMA: Types of Bonds

Resources

• TreasuryDirect
• T. Rowe Price Domestic Bonds Mutual Fund