You can buy corporate bonds through a brokerage account, directly from some companies, or through bond funds

Corporate bonds are sold through the same brokerage firms where you might buy stocks — firms like Fidelity, Charles Schwab, E-Trade, or Vanguard. You open a regular investment account (not a retirement account, though you can hold bonds there too), deposit money, and search for bonds by company name or ticker. The process is straightforward once you have an account, though the bond market itself works differently than the stock market in ways that matter for your costs and timing.

You can also buy some bonds directly from the issuing company during a new bond offering, though this route is less common for individual investors and usually requires larger minimum purchases. A third option is buying into a bond fund or exchange-traded fund (ETF) that holds corporate bonds, which spreads your money across many bonds and is simpler if you are new to bonds.

Key Takeaways

  • Open a brokerage account with a major firm, fund it, and search for corporate bonds by company name or bond ticker to see available offerings and their yields.
  • Corporate bonds trade in the secondary market with bid-ask spreads that vary widely, so the price you pay depends partly on market conditions and the bond's liquidity.
  • New bond offerings (called primary market purchases) sometimes have lower minimums and no trading spread, but they are less frequently available to individual investors than secondary market bonds.
  • Bond funds and ETFs let you own pieces of many corporate bonds at once, which reduces the risk that any single company defaults and simplifies the buying process.
  • You will pay attention to the bond's coupon rate (interest payment), maturity date (when you get your principal back), and credit rating (the issuer's ability to pay).

Opening a brokerage account and finding bonds to buy

Start by choosing a brokerage firm. The major ones — Fidelity, Charles Schwab, E-Trade, Vanguard, and Interactive Brokers — all allow individual investors to buy corporate bonds. You will need to open a standard taxable investment account (or use an existing retirement account if you have one). The application takes 10 to 20 minutes online and requires your Social Security number, address, and employment information.

Once your account is open and funded with cash, log into the trading platform and search for bonds. Most platforms have a dedicated bond search tool where you can filter by company name, ticker, maturity date, coupon rate, or credit rating. When you find a bond you want, the platform shows you the current bid price (what you would pay to buy it) and the ask price (what sellers want). The difference between these is the bid-ask spread, and it is your real cost beyond the price itself — spreads on corporate bonds can range from a fraction of a cent to several cents per $100 of bond value, depending on how actively the bond trades.

Before you buy, check the bond's credit rating from agencies like Moody's, Standard & Poor's, or Fitch. Ratings range from AAA (safest) down to D (in default). Investment-grade bonds are rated BBB or higher; anything below that is considered high-yield or "junk" and carries more default risk. Your brokerage platform usually displays the rating alongside the bond details.

Understanding what you pay and when you get paid back

When you buy a corporate bond, you are lending money to the company. The bond has three key numbers: the face value (usually $1,000 per bond), the coupon rate (the interest percentage the company pays you annually or semi-annually), and the maturity date (when the company returns your principal). If you buy a bond with a 5% coupon and $1,000 face value, you receive $50 per year in interest payments, usually split into two $25 payments.

The price you pay today may be higher or lower than the $1,000 face value, depending on interest rates and the company's credit quality. If you buy a bond for $950, you are buying it at a discount; if you pay $1,050, you are buying it at a premium. The yield you actually earn accounts for both the coupon payments and whether you bought at a discount or premium. Your brokerage platform shows you the yield to maturity (YTM), which is the total annual return you would earn if you hold the bond until it matures.

Interest payments arrive on a schedule set when the bond was issued — often on the 15th of specific months. You receive these payments directly into your brokerage account. When the bond matures, the company returns your principal (the $1,000 face value, not the price you paid), and the bond is gone from your account.

Buying bonds in the secondary market versus new offerings

Most individual investors buy bonds in the secondary market, meaning bonds that were issued months or years ago and are now trading between investors. This market is where your brokerage finds bonds to sell you. Prices fluctuate based on interest rates, the company's financial health, and how many people want to buy or sell that particular bond. The bid-ask spread is your cost for this flexibility — you can buy or sell whenever you want, but you pay a middleman's fee built into the price.

A second route is buying bonds during a new offering (the primary market). When a company issues new bonds, investment banks handle the sale. Individual investors can sometimes buy directly from these offerings, often with no bid-ask spread and sometimes with lower minimum purchases than the secondary market. However, new offerings are announced irregularly and may not be available for the company or maturity date you want. Your brokerage will notify you of new offerings if you ask, or you can check their bond offerings page.

Buying bonds through funds instead of individual bonds

If picking individual bonds feels complicated or you want to own many bonds at once, a corporate bond fund or bond ETF is simpler. These funds pool money from many investors and buy a portfolio of corporate bonds. You buy shares of the fund just like you would buy stock, and the fund manager handles the bond selection and trading.

Bond funds come in different flavors: some hold only investment-grade bonds (lower risk), others hold high-yield bonds (higher risk, higher potential return), and some mix them. Popular options include the Vanguard Corporate Bond ETF (VTC), the iShares Investment Grade Corporate Bond ETF (LQD), and the Vanguard High-Yield Corporate ETF (VYM). You can buy shares through any brokerage in the same way you buy stock, and you receive dividend payments (the interest the fund collects) regularly.

The trade-off is that you pay a small annual fee (called an expense ratio) to the fund manager, usually between 0.04% and 0.50% per year depending on the fund. You also do not know exactly which bonds you own — the fund manager decides that. But you get instant diversification, professional management, and the ability to sell your shares anytime the market is open, which is easier than selling individual bonds.

Minimum purchases and account requirements

Individual corporate bonds typically have a minimum purchase of one bond, which costs around $1,000 (the standard face value). Some brokerages allow fractional bond purchases, meaning you can invest less than $1,000 in a single bond, though this is less common. Check your brokerage's rules before you assume you need $1,000 per bond.

Bond funds and ETFs have no minimum purchase beyond the price of one share, which might be $50 to $150 depending on the fund. This makes them accessible if you have a smaller amount to invest.

You do not need any special account type to buy corporate bonds — a regular taxable brokerage account works fine. You can also hold bonds in an IRA, 401(k), or other retirement account if your plan allows it, which may offer tax advantages depending on your situation.

Taxes on bond interest and when you sell

Interest you receive from corporate bonds is taxed as ordinary income at your regular tax rate, not at the lower capital gains rate. This matters for tax planning — if you hold bonds in a taxable account, you pay tax on the interest every year even if you do not sell the bond. Some investors use retirement accounts to hold bonds for this reason.

If you sell a bond before maturity for more than you paid, you owe capital gains tax on the profit. If you sell for less, you can claim a capital loss. If you hold the bond until maturity, you do not have a gain or loss — you simply get your principal back.

Risks to understand before you buy

Default risk is the chance the company stops paying interest or fails to return your principal. This is why credit ratings matter — higher-rated bonds are safer but pay less interest. Lower-rated bonds pay more but carry real risk of loss.

Interest rate risk means that if interest rates rise after you buy a bond, the bond's market value falls (because new bonds will pay higher rates). If you need to sell before maturity, you may have to sell at a loss. The longer the bond's maturity, the bigger this risk. Conversely, if rates fall, your bond becomes more valuable.

Liquidity risk applies mainly to individual bonds — some corporate bonds trade rarely, and you may have trouble selling quickly or may face a wide bid-ask spread. Bond funds do not have this problem because the fund manager handles the trading.

Frequently Asked Questions

Do I need a lot of money to start buying corporate bonds?

No. One corporate bond costs around $1,000, though some brokerages now allow fractional purchases for less. Bond ETFs and funds let you invest smaller amounts — you can buy one share for $50 to $150 depending on the fund. Start with whatever amount you can afford.

What is the difference between the coupon rate and the yield?

The coupon rate is the fixed interest percentage the company pays you — it never changes. The yield is your actual return, which accounts for the price you paid. If you buy a bond at a discount, your yield is higher than the coupon. If you buy at a premium, your yield is lower. Your brokerage shows you the yield to maturity so you know your real return.

Can I sell a corporate bond before it matures?

Yes, you can sell anytime the market is open by placing a sell order through your brokerage. The price you receive depends on current interest rates and the company's credit quality — you may get more or less than you paid. Bond funds and ETFs are easier to sell because they trade like stocks. Individual bonds may take longer to sell if they do not trade frequently.

What happens if the company goes bankrupt?

Bondholders are paid before stockholders in bankruptcy, so you have a better chance of recovering some money than stock investors do. However, you may not recover the full amount. This is why credit ratings and diversification matter — owning many bonds across different companies reduces the impact of any single default.

Should I buy individual bonds or a bond fund?

Individual bonds work well if you want predictable income, know which companies you trust, and plan to hold until maturity. Bond funds are simpler if you are new to bonds, want instant diversification, or prefer not to pick individual securities. Many investors use both — a core holding in a bond fund plus a few individual bonds they understand well.