The basic steps to buy bonds at Fidelity

To buy bonds through Fidelity, log into your account, go to the Trade tab, select Bonds, and search for the specific bond you want by its CUSIP number or issuer name. Once you find it, enter the quantity and price limit you're willing to pay, review the order, and submit. Fidelity will execute the trade during market hours, and the bond will settle in your account within two business days.

The entire process takes about five minutes if you know which bond you want. If you're unsure which bond fits your situation, Fidelity's Bond Center shows current offerings with maturity dates, yields, and credit ratings so you can compare before you buy.

Key Takeaways

  • You can buy individual bonds, bond funds, or bond ETFs through Fidelity depending on how much money you have and how hands-on you want to be.
  • Individual bonds require a minimum purchase of $1,000 to $5,000 per bond, while bond funds and ETFs let you start with smaller amounts.
  • Fidelity charges no commission on most bond trades, but you pay the bid-ask spread (the difference between what buyers and sellers will pay).
  • Bonds settle in two business days, meaning your cash is held until the trade completes and you own the bond.
  • You need to decide whether you want to hold the bond to maturity or trade it before it matures, because selling early means price risk.

Individual bonds versus bond funds and ETFs

Individual bonds and bond funds are different products with different trade-offs. When you buy an individual bond, you own that specific debt instrument and know exactly when you'll get your money back (the maturity date) and how much interest you'll receive. If you hold it to maturity, you get your principal back regardless of what happens to interest rates. You pay a bid-ask spread on the trade but no ongoing fees.

Bond funds and bond ETFs pool money from many investors to buy a basket of bonds. You own a share of that pool, not individual bonds. The fund manager buys and sells bonds constantly, so you don't know exactly which bonds you own or when you'll get your money back. You pay no bid-ask spread when you buy or sell shares, but you pay an annual expense ratio (usually 0.05% to 0.50% per year). Bond funds are better if you have less than $5,000 to invest or want someone else managing the portfolio.

Most new bond investors start with bond funds or ETFs because they're simpler and require less money upfront. Individual bonds make sense if you have $10,000 or more, know your time horizon, and want predictable income.

Understanding bond types available at Fidelity

Fidelity offers U.S. Treasury bonds (backed by the federal government), municipal bonds (issued by states and cities, often tax-free), corporate bonds (issued by companies), and high-yield bonds (riskier corporate bonds that pay higher interest). Each type has different risk and return characteristics.

Treasury bonds are the safest but pay the lowest interest rates. Municipal bonds may be tax-free at the federal level or state level depending on where you live and where the bond was issued. Corporate bonds pay more interest than Treasuries but carry the risk that the company could default. High-yield bonds pay the most but are riskier. Fidelity's Bond Center shows the credit rating for each bond so you can see how risky it is before you buy.

How to search for and evaluate bonds

Start by going to Fidelity's Bond Center and filtering by bond type, maturity date, and yield. If you want your money back in five years, filter for bonds maturing in five years. If you want a specific income level, filter by yield. Fidelity shows you the current bid price (what you'll pay), the ask price (what sellers want), and the spread between them.

Look at the credit rating — bonds rated BBB or higher are considered investment-grade and lower-risk. Bonds rated BB or lower are high-yield (junk bonds) and riskier. Read the issuer name and description so you understand who you're lending money to. If it's a company you've never heard of, research it or stick with Treasury or municipal bonds until you're more comfortable.

Compare the yield to what you could get in a savings account or money market fund. If a bond's yield is only slightly higher than a savings account and you'd have to lock your money up for five years, the trade-off may not be worth it. If the yield is significantly higher, ask yourself why — it usually means the bond is riskier.

Placing your first bond order

Once you've chosen a bond, click Trade and select Bonds. Enter the CUSIP number (a nine-character code that uniquely identifies each bond) or search by issuer name. Fidelity will show you available bonds from that issuer with different maturity dates and prices.

Select the bond you want and enter the quantity (usually in increments of $1,000). You can enter a limit order (the maximum price you're willing to pay) or a market order (buy at the current market price). Limit orders are safer because you control the price, but they may not fill if the market price moves above your limit. Market orders fill immediately but may cost slightly more.

Review the order summary, which shows the bond description, maturity date, yield, and total cost including the bid-ask spread. Click Submit to place the order. Fidelity will confirm the trade within seconds during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays).

Settlement and what happens after you buy

Your bond order settles in two business days, meaning the seller delivers the bond to your account and your cash leaves your account. Until settlement completes, the bond appears in your account as "pending" and you can't sell it yet. After settlement, the bond is fully yours and you'll start receiving interest payments on the scheduled dates.

Fidelity shows your bond holdings in your account with the purchase price, current market value, yield, and maturity date. If interest rates rise after you buy, the market value of your bond will fall (because new bonds will pay higher interest). If you hold the bond to maturity, you get your full principal back regardless of the market value. If you sell before maturity, you'll get whatever the market price is at that time.

Costs and fees to know about

Fidelity charges no commission on most bond trades, which is a major advantage over traditional brokers. However, you pay the bid-ask spread — the difference between what buyers will pay and what sellers want. On a $10,000 bond, the spread might be $20 to $50, which is built into the price you see.

If you hold the bond to maturity, there are no other fees. If you sell before maturity, you pay the bid-ask spread again on the sale. Bond funds and ETFs charge an annual expense ratio, which Fidelity deducts automatically from your account each year. Treasury bonds have the tightest spreads (cheapest to trade), while corporate and municipal bonds have wider spreads.

Frequently Asked Questions

What's the minimum amount I need to buy a bond at Fidelity?

Individual bonds typically require $1,000 to $5,000 per bond depending on the type and issuer. Bond funds and ETFs have no minimum or a very low minimum (sometimes $1). If you have less than $5,000, start with a bond fund or ETF.

Can I sell a bond before it matures?

Yes, you can sell any bond on the secondary market before maturity. However, if interest rates have risen since you bought it, the market price will be lower than what you paid. If interest rates have fallen, the market price will be higher. You pay a bid-ask spread on the sale just like you did on the purchase.

How often do I get paid interest on a bond?

Most bonds pay interest twice a year (semi-annually), though some pay quarterly or annually. The bond description shows the payment schedule. Interest is deposited directly into your Fidelity account on the payment date.

What happens if the bond issuer defaults?

If a company or municipality defaults, you may lose some or all of your principal. This is why credit ratings matter — investment-grade bonds (BBB or higher) have a very low default rate. Treasury bonds cannot default because they're backed by the U.S. government. If you're worried about default risk, stick with Treasuries or high-rated municipal bonds.

Should I buy individual bonds or a bond fund?

Buy individual bonds if you have $10,000 or more, know when you'll need the money, and want predictable income. Buy a bond fund or ETF if you have less money, want diversification across many bonds, or prefer a hands-off approach. Most investors benefit from bond funds because they're simpler and spread risk across many issuers.