You can buy corporate bonds through a brokerage account, directly from a corporation, or through a bond fund — each route has different costs and minimum investments

Corporate bonds are debt issued by companies, and you buy them the same way you buy stocks: through a brokerage firm. The three main routes are opening a brokerage account (the most common), buying directly from a company during a new bond offering, or investing through a mutual fund or exchange-traded fund that holds bonds. Your choice depends on how much money you have to invest, how much trading you want to do, and whether you prefer picking individual bonds or letting a fund manager handle it.

Most individual investors start with a brokerage account because it gives you access to the secondary market — where existing bonds trade between investors — and the lowest barrier to entry. You can buy a single bond or dozens. If you have less than $5,000 to invest or want instant diversification, a bond fund may make more sense because it spreads your money across many bonds at once.

Key Takeaways

  • A brokerage account (through firms like Fidelity, Charles Schwab, or Vanguard) is the standard way to buy individual corporate bonds on the secondary market.
  • Bond funds and ETFs let you invest smaller amounts and own pieces of many bonds without picking individual securities yourself.
  • New bond offerings sometimes allow direct purchase from the company or underwriter, but these are less common for individual investors.
  • Buying on the secondary market means you pay a markup or spread to the broker, which is usually built into the price you see rather than shown as a separate fee.
  • Minimum investments for individual bonds are typically $1,000 per bond, though some brokers now offer fractional bond ownership.

Opening a Brokerage Account to Buy Individual Bonds

A brokerage account is a straightforward path: you open an account with a firm, deposit money, and search for bonds to buy. Major brokers that offer corporate bonds include Fidelity, Charles Schwab, Vanguard, E*TRADE, and Interactive Brokers. Each firm maintains a list of available bonds — usually hundreds or thousands — that you can filter by maturity date, credit rating, yield, and issuer.

When you buy a bond through a broker, you are buying it on the secondary market from another investor or dealer, not directly from the company. The broker charges a markup (called a spread) on the price, which is usually not shown as a separate line item — it is built into the price you see on your screen. This spread typically ranges from 0.5% to 2% of the bond's face value, depending on how actively the bond trades and the broker's pricing.

Minimum investments are usually $1,000 per bond (the standard face value), though some brokers now offer fractional shares that let you buy smaller amounts. Account setup takes a few days, and you can begin trading once your deposit clears. Most brokers offer research tools, bond screeners, and educational resources to help you choose.

Bond Funds and ETFs for Smaller or Diversified Investments

A bond fund is a mutual fund that holds many corporate bonds and lets you own a piece of each one. An ETF (exchange-traded fund) works the same way but trades like a stock during market hours. Both let you invest any amount — even $100 — and instantly own a diversified portfolio instead of betting on a single bond.

Bond funds charge an annual expense ratio (typically 0.05% to 0.50% per year for corporate bond funds) instead of a per-trade markup. You can buy them through any brokerage account, and many employers offer them in retirement plans like 401(k)s. The trade-off is that you do not pick which bonds the fund holds — a manager does that for you — and you cannot control when the fund sells bonds or how it reinvests interest payments.

Bond ETFs are often cheaper than mutual funds (expense ratios as low as 0.03% to 0.10%) and trade throughout the day like stocks, so you can sell instantly if you need cash. Mutual funds only price once per day after markets close. For most people new to bonds, a low-cost bond ETF is the simplest entry point.

Direct Purchase During New Bond Offerings

When a company issues new bonds, it sometimes allows individuals to buy directly through the underwriter or the company's investor relations department. This route skips the secondary market and the broker's markup, but it is less common for retail investors and usually requires larger minimum investments ($5,000 to $25,000 or more).

To find new offerings, you can contact a company's investor relations team directly, watch financial news sites like Bloomberg or MarketWatch for new issuances, or ask your broker if they have access to new offerings. The process is slower than buying on the secondary market — you may have to wait weeks for the offering to close — and you cannot sell the bond until it begins trading on the secondary market.

What to Expect When You Place an Order

Once you have chosen a bond and are ready to buy, you enter an order through your broker's platform just as you would for a stock. You specify the bond's identifier (usually a CUSIP number), the quantity, and whether you want to buy at market price or set a limit price. Most orders execute within seconds to minutes during market hours (9:30 a.m. to 4 p.m. Eastern, Monday through Friday).

The bond settles in your account two business days later (called T+2 settlement). You will see the bond listed in your holdings, and interest payments (called coupon payments) will be deposited into your account on the scheduled dates, usually twice per year. You can hold the bond until maturity, sell it early on the secondary market, or let it be called if the company chooses to redeem it before the maturity date.

Comparing Costs Across Different Routes

The cost of buying bonds varies by method. Individual bonds bought through a broker carry a hidden spread (0.5% to 2%), which you pay once at purchase. Bond ETFs charge an annual expense ratio (0.03% to 0.50% per year) but no per-trade markup. Bond mutual funds charge a similar annual fee, sometimes plus a sales load (1% to 5%) if you buy through a financial advisor.

If you are buying a $10,000 bond through a broker with a 1% spread, you pay $100 upfront. If you invest $10,000 in a bond ETF with a 0.10% expense ratio, you pay $10 per year. Over a five-year hold, the ETF costs $50 total; the individual bond costs $100 once. For longer holds or larger purchases, individual bonds can be cheaper. For smaller amounts or shorter time horizons, ETFs are usually the better deal.

Understanding Credit Ratings and Risk Before You Buy

Before you buy any corporate bond, check its 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 higher default risk. Your broker's bond screener will show the rating, and you can also look it up free on the company's website or through financial data sites.

Higher-rated bonds pay lower interest rates because they are safer. Lower-rated bonds pay more to compensate you for the extra risk. There is no single "right" choice — it depends on your risk tolerance and how long you can afford to hold the bond if the company runs into trouble. Most beginners should stick to investment-grade bonds from stable, well-known companies.

Frequently Asked Questions

Can I buy corporate bonds with a small amount of money?

Yes, through a bond fund or ETF. Individual bonds typically require $1,000 minimums, though some brokers now offer fractional ownership. Bond funds and ETFs let you start with $100 or less and own pieces of many bonds instantly.

Do I need a financial advisor to buy corporate bonds?

No. You can open a brokerage account and buy bonds yourself in minutes. A financial advisor can help you choose which bonds fit your goals, but you will pay fees (usually 0.5% to 1% per year) for that service. Many people research bonds independently using their broker's tools.

What happens if I need to sell a bond before it matures?

You can sell it on the secondary market through your broker anytime the market is open. The price you receive depends on interest rates and the bond's credit quality — if rates have risen since you bought it, you may sell at a loss. Bond funds and ETFs can be sold instantly like stocks.

Are there fees for holding a bond in my brokerage account?

Most brokers do not charge account maintenance fees or annual holding fees for bonds. You pay the spread when you buy and when you sell. Some brokers charge a small fee (usually $1 to $5) if you hold a bond to maturity and collect the final payment, but this is rare.

Can I buy bonds through my retirement account?

Yes. Most 401(k)s and IRAs allow you to buy individual bonds or bond funds. Some employer 401(k)s offer a limited selection of bond funds; IRAs typically give you access to any bond your brokerage offers. Bonds held in retirement accounts grow tax-free (or tax-deferred, depending on account type).