You can buy corporate bonds through a broker, directly from the issuer, or through a bond fund — each route has different costs and minimum investments
Corporate bonds are sold through three main channels: a brokerage account (the most common route for individual investors), directly from the company or a transfer agent, or bundled into a bond mutual fund or exchange-traded fund. The route you choose affects what you pay upfront, how much money you need to start, and how easily you can sell later. Most individual investors use a broker because the process is straightforward and you can buy a single bond without a large minimum.
The bond market itself is less centralized than the stock market. There is no single exchange where all corporate bonds trade. Instead, bonds are bought and sold over-the-counter through dealers and brokers, which means prices and availability vary by firm. This also means you should compare offerings across brokers before committing money.
Key Takeaways
- Brokers like Fidelity, Charles Schwab, and Vanguard let you buy individual corporate bonds with minimums as low as $1,000 per bond, and you can see the price and yield before you buy.
- Direct purchase from a company or its transfer agent is rare for corporate bonds but possible; you typically need $5,000 or more and must contact the issuer directly.
- Bond funds and ETFs let you own a diversified portfolio of corporate bonds with lower minimums (sometimes $100 or less) but charge annual fees and don't let you control which bonds you own.
- Brokerage fees for buying individual bonds range from zero to $50 per transaction depending on the firm; compare costs before opening an account.
- The secondary market (buying bonds already issued) is where most individual investors buy; new issues are typically sold to institutional buyers first.
Buying through a brokerage account
A brokerage account is the standard way individual investors buy corporate bonds. You open an account with a firm like Fidelity, Charles Schwab, E*TRADE, Vanguard, or TD Ameritrade, deposit money, and search for bonds in their inventory. The broker acts as a dealer, holding bonds in stock and selling them to you at a markup. You see the price, yield, and maturity date before you commit.
Most brokers require a minimum of $1,000 per bond purchase, though some allow $500. You can buy as few or as many bonds as you want (subject to availability), and you own them outright in your account. When the bond matures, the issuer pays you back the face value plus any final interest payment. If you need to sell before maturity, you can do so through the same broker, though you may get a different price depending on market conditions.
Brokerage fees vary. Some firms (including Fidelity and Charles Schwab for certain bonds) charge zero commission on corporate bond trades. Others charge $25 to $50 per transaction. Ask about fees before you open an account, because they directly reduce your return. A $50 fee on a $5,000 bond purchase costs you 1 percent of your money upfront.
Buying bonds directly from the issuer
Some companies allow you to buy their bonds directly without going through a broker. You contact the company's investor relations department or its transfer agent (the firm that handles shareholder records) and request a purchase. This route eliminates the broker markup and commission, which sounds appealing, but it has real drawbacks for individual investors.
Direct purchases usually require a minimum of $5,000 to $25,000 per bond, far higher than a brokerage minimum. You also have no secondary market — if you need to sell before maturity, you must sell back to the company or find a buyer on your own, which is difficult and time-consuming. Most companies do not actively repurchase their own bonds from individuals. For these reasons, direct purchase is practical only if you plan to hold the bond until it matures and can afford the high minimum.
To explore this option, visit the company's investor relations website and look for a "contact us" link or a section on debt offerings. Some companies list their bonds and transfer agent contact information there. Be prepared to provide proof of identity and banking information, and expect a longer settlement process than you would through a broker.
Bond funds and exchange-traded funds
A bond fund pools money from many investors and buys a portfolio of corporate bonds on your behalf. A fund manager selects which bonds to hold based on the fund's stated strategy (for example, investment-grade bonds, high-yield bonds, or a mix). You buy shares of the fund, not individual bonds. Minimums are often $100 to $1,000 for the first purchase, much lower than buying individual bonds.
The trade-off is that you do not control which bonds you own, and you pay an annual fee (called an expense ratio) that ranges from 0.05 percent to over 1 percent per year depending on the fund. That fee is deducted from your returns automatically. You also do not get a maturity date or a may provide return of principal — the fund's value fluctuates with bond prices, and you can lose money if you sell when prices are down.
Bond ETFs work similarly to mutual funds but trade on an exchange like stocks. They often have lower expense ratios than mutual funds (some as low as 0.03 percent) and no minimum investment beyond the price of one share. Both are good options if you want diversification without picking individual bonds, or if you have a small amount to invest.
Understanding bond pricing and markups
When you buy a bond through a broker, the price you see includes a markup — the dealer's profit. The markup is not listed separately; it is built into the price. For a $1,000 bond, the markup might be $10 to $30, depending on the bond's liquidity (how easily it trades) and the broker's pricing practices. Highly traded bonds have smaller markups; less common bonds have larger ones.
You cannot eliminate the markup, but you can minimize it by comparing prices across brokers before you buy. Some brokers publish their markups; others do not. If you are buying a large quantity or a less common bond, call the broker and ask what markup they are charging. Shopping around can save you hundreds of dollars on a large purchase.
New issues versus secondary market bonds
When a company first issues a bond, it is called a new issue. New corporate bonds are typically sold to institutional investors (pension funds, insurance companies, mutual funds) through underwriters. Individual investors can sometimes buy new issues through a brokerage, but availability is limited and you may not see them until after the initial offering period closes.
The secondary market is where most individual investors buy bonds — these are bonds that have already been issued and are now trading between investors. The secondary market is much larger and more liquid than the new-issue market. Prices fluctuate based on interest rates, the company's credit quality, and supply and demand. You have far more choices in the secondary market, and you can buy at any time.
Comparing costs across different routes
The total cost of buying a corporate bond depends on the route you choose and the size of your purchase. Here is how the main options compare:
| Route | Minimum Investment | Typical Costs | Best For |
|---|---|---|---|
| Brokerage (individual bonds) | $500–$1,000 | $0–$50 per trade plus embedded markup | Investors who want to own specific bonds and hold to maturity |
| Direct from issuer | $5,000–$25,000 | No commission; no secondary market | Large purchases held to maturity; rare for individuals |
| Bond mutual fund | $100–$1,000 | 0.05%–1%+ annual expense ratio | Diversified exposure with low minimums; passive investors |
| Bond ETF | Price of one share (often $50–$100) | 0.03%–0.5% annual expense ratio | Low-cost diversification; active traders |
For a $5,000 purchase of an individual bond through a broker charging $25 per trade, your upfront cost is 0.5 percent. If you hold the bond for five years, that cost is spread across those years. A bond fund with a 0.5 percent annual expense ratio costs you 0.5 percent every year, regardless of how long you hold it. Over five years, the fund costs 2.5 percent total. For longer holding periods, individual bonds often cost less overall.
Frequently Asked Questions
Do I need a brokerage account to buy corporate bonds?
For most people, yes. A brokerage account is the easiest and most common way to buy individual corporate bonds. You can also buy bonds directly from the issuer (rare and requires high minimums) or through a bond fund without a brokerage account, though you still need an investment account of some kind.
What is the difference between a bond's price and its yield?
Price is what you pay upfront (expressed as a percentage of face value; $1,000 is par, or 100). Yield is the annual return you receive, expressed as a percentage. If you buy a bond at a discount (below par), your yield is higher than the stated coupon rate. If you buy at a premium (above par), your yield is lower. Brokers show both figures before you buy.
Can I sell a corporate bond before it matures?
Yes, through your broker on the secondary market. You may get more or less than you paid depending on interest rates and the company's credit quality. Selling before maturity introduces market risk — if rates have risen since you bought, your bond is worth less. If you hold to maturity, you get your full principal back (assuming the company does not default).
Which brokerage is cheapest for buying corporate bonds?
Fidelity and Charles Schwab offer zero-commission trades on many corporate bonds, making them competitive for individual investors. Vanguard charges commissions on some bonds but not others. Compare the specific bonds you want to buy across brokers, because availability and pricing vary by firm and by bond.
Should I buy individual bonds or a bond fund?
Individual bonds are better if you want predictable income, know your maturity date, and plan to hold to maturity. Bond funds are better if you want diversification, have a small amount to invest, or prefer not to pick individual securities. Funds are also simpler if you want to add money regularly over time.