How to Invest in Bonds Versus Bond Funds

You can invest directly in U.S. Treasury bonds.

Individual bonds are sold by brokers and dealers that have bond trading desks. An investor who wants to build a portfolio of corporate or municipal bonds should find a dealer that works with these types of bonds. Another option is to build a portfolio of U.S. Treasury securities through the Treasury's online purchase system. Here, an investor can select and buy specific bond issues.

Instructions

1. Apply for an account with Treasury Direct (see Resources). The link for new account applications is on the homepage in the right column. You will need your name, a U.S. address, Social Security number, email address and information for a bank checking or savings account.

2. Obtain your Treasury Direct access card. The card will be mailed to you about two weeks after you complete the application. The access card contains security information necessary to purchase Treasury bonds.

3. Study the information on the Treasury Direct website about the different types of Treasury securities. Note the auction dates and minimum-investment amounts for the different bills, notes and bonds. This is a useful activity while waiting for your access card to arrive.

4. Log in to your Treasury Direct account using the security information from your access card. Select "Buy Direct" to take you to the purchase screen.

5. Enter the types of Treasury bonds and amounts you want to purchase. Review the purchase details and place the order for the bonds. The money to pay for the bonds will be withdrawn from the bank account you linked to during the application process.

6. Check your account after the appropriate auction date to find the price and yield of your bond purchase. The bonds should show in your account about four days after the bond auction.

Tips & Warnings

• Treasury notes, bonds and Treasury Inflation-Protected Securities (TIPS) can be purchased in multiples of $100 through Treasury Direct. Treasury bills have a $1,000 minimum purchase amount.

• Treasury Direct allows you to set up a regular automatic investment program for Treasury bonds.

• Treasury securities are marketable securities. The current market value of these securities will go up and down with changing interest rates. Rising interest rates will cause bond prices to decline.

References

• Treasury Direct