You can buy corporate bonds through a brokerage account, directly from a corporation, or through a bond fund

Corporate bonds are sold through several channels, and which one you use depends on how much you want to invest, how hands-on you want to be, and whether you prefer individual bonds or a diversified portfolio. Most individual investors buy through a brokerage — the same place they might buy stocks. Some corporations sell bonds directly to the public. Others are available only through bond funds or mutual funds that hold them for you.

The route you choose affects what you pay in fees, how much money you need to start, and how much work it takes to manage your investment. There is no single best option; it depends on your situation.

Key Takeaways

  • Brokerages like Fidelity, Charles Schwab, and E*TRADE let you buy individual corporate bonds with a brokerage account, usually with a minimum investment of $1,000 per bond.
  • Bond funds and ETFs spread your money across many corporate bonds and require smaller initial investments, often $100 or less, but charge annual management fees.
  • Some corporations sell bonds directly to investors through their investor relations websites, sometimes with no middleman fees, though this requires more research on your part.
  • The secondary bond market — where existing bonds are resold — is where most individual investors actually buy, and prices fluctuate based on interest rates and the issuer's credit quality.
  • Buying through a brokerage typically costs $0 to $10 per transaction in commissions, while bond funds charge annual expense ratios ranging from 0.05% to over 1%.

Buying individual bonds through a brokerage account

A brokerage account is the most common way individual investors buy corporate bonds. You open an account at a firm like Fidelity, Charles Schwab, E*TRADE, or TD Ameritrade, fund it with cash, and then search for and purchase bonds through their platform. The process is similar to buying stocks, except you are searching by bond name, ticker, or issuer rather than company stock symbol.

Most brokerages require a minimum of $1,000 to $5,000 per bond purchase, though some allow smaller amounts. When you buy, you are usually purchasing from the secondary market — meaning the bond was already issued and is now being resold by another investor or a dealer. The brokerage acts as the intermediary and charges a commission, typically $0 to $10 per transaction, though some firms advertise commission-free bond trading.

The advantage of this route is control: you choose exactly which bonds you own, you know the maturity date and interest rate, and you can hold them to maturity or sell them before then. The disadvantage is that you need enough capital to buy multiple bonds if you want diversification, and you have to research each bond individually to understand the issuer's creditworthiness.

Bond funds and ETFs for smaller investments

A bond fund or bond ETF pools money from many investors and buys a portfolio of corporate bonds on your behalf. You buy shares of the fund, not individual bonds. This approach requires much less money to start — often $100 or even $1 per share for an ETF — and gives you instant diversification across dozens or hundreds of bonds.

Bond funds are managed by professionals who research issuers and rebalance the portfolio. ETFs are similar but trade on an exchange like stocks. Both charge an annual expense ratio — a percentage of your investment that covers management and operating costs. For corporate bond funds, this typically ranges from 0.05% to over 1% per year, depending on the fund's strategy and whether it is actively or passively managed.

The trade-off is that you do not own the underlying bonds directly. The fund manager decides when to buy and sell, and the fund's value fluctuates daily based on interest rate changes and the credit quality of the bonds it holds. You also cannot target a specific maturity date the way you can with an individual bond.

Direct purchase programs from corporations

Some large corporations offer direct purchase programs that let you buy their bonds straight from them without going through a brokerage. You typically find information about these programs on the company's investor relations website. The advantage is that you may avoid brokerage fees entirely, and you deal directly with the issuer.

The disadvantage is that direct programs require significant research on your part — you have to find the program, understand the terms, and manage the paperwork yourself. These programs are less common than they once were, and they are usually available only for larger bond offerings. Many investors find it simpler to use a brokerage, even if it means paying a small commission.

The secondary bond market and price fluctuations

Most corporate bonds bought by individuals are purchased on the secondary market, meaning they were already issued and are now being resold. This is different from buying a new bond directly from the issuer (the primary market). Secondary market prices change constantly based on interest rates, the issuer's credit rating, and overall demand.

When you buy a bond on the secondary market, you may pay more or less than its face value. If interest rates have fallen since the bond was issued, the bond's price rises because its fixed interest rate is now more attractive. If interest rates have risen, the price falls. This price movement matters if you plan to sell before maturity; if you hold to maturity, you get the full face value back regardless of what you paid.

Brokerages provide tools to search the secondary market and compare prices and yields across available bonds. The bid-ask spread — the difference between what a seller wants and what a buyer offers — is built into the price you see, and this is how dealers make money on bond trades.

Comparing costs: commissions, spreads, and expense ratios

The cost of buying corporate bonds varies by method. Individual bond purchases through a brokerage typically cost $0 to $10 per transaction in commissions, though you also pay an implicit cost in the bid-ask spread. Bond funds and ETFs charge annual expense ratios that range from 0.05% for a low-cost index fund to 1% or more for actively managed funds. Direct purchase programs may have no commission but often require larger minimum investments.

To compare, consider a $10,000 investment. Buying one $5,000 bond through a brokerage might cost $5 to $10 in commission plus the bid-ask spread (typically $10 to $50). A bond fund with a 0.20% expense ratio would cost $20 per year. Over time, the fund's annual fee adds up, but if you are buying multiple individual bonds, the commissions and spreads accumulate too. The best choice depends on how much you invest and how often you trade.

What to consider when choosing where to buy

Start by deciding whether you want to own individual bonds or invest through a fund. Individual bonds make sense if you have at least $10,000 to $25,000 to invest, you want to hold to maturity, and you are willing to research issuers. Bond funds make sense if you have less capital, want professional management, or prefer not to research individual companies.

Next, compare the platforms available to you. If you already have a brokerage account for stocks, check whether that firm offers corporate bonds with reasonable commissions and a good selection. If you are starting fresh, look at Fidelity, Charles Schwab, and E*TRADE, which all offer corporate bonds and bond funds with low or no commissions. For bond funds, compare expense ratios across providers — a difference of 0.5% per year is significant over time.

Finally, consider your time commitment. Buying individual bonds requires ongoing attention to credit ratings and market conditions. Bond funds require less active management but offer less control. There is no wrong answer, only the choice that fits your situation.

Frequently Asked Questions

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

It depends on your method. Individual bonds typically require $1,000 to $5,000 per bond, so you need at least that much to buy even one. Bond ETFs and mutual funds can be started with $100 or less. If you have less than $5,000, a bond fund is usually the better option.

Can I buy corporate bonds through my retirement account?

Yes. Most IRAs and 401(k) plans allow you to hold corporate bonds or bond funds within the account. Check with your account provider about which bonds or funds are available. Holding bonds in a retirement account can be tax-efficient because you do not pay taxes on interest income until you withdraw money.

What is the difference between buying a new bond and buying one on the secondary market?

A new bond is sold directly by the issuer at face value. A secondary market bond is resold by another investor and may be priced above or below face value depending on interest rates and credit conditions. Most individual investors buy on the secondary market because new bond offerings are often limited to institutional investors or require very large minimums.

How do I know if a corporate bond is safe to buy?

Check the bond's credit rating from agencies like Moody's, Standard & Poor's, or Fitch. Ratings range from AAA (safest) to D (in default). You can also review the company's financial statements and debt levels through the SEC's EDGAR database or the company's investor relations website. Bond funds do this research for you, which is one reason some investors prefer them.

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

You can sell it on the secondary market through your brokerage, but the price you receive depends on current interest rates and the issuer's credit quality. If rates have risen since you bought, you will likely receive less than you paid. If rates have fallen, you may receive more. This is why holding to maturity is often simpler for individual investors.