4 Simple Strategies: How to Buy Bonds on Fidelity Easily

So, you’re looking to diversify your portfolio with bonds and Fidelity is your brokerage of choice? That’s smart. Bonds can offer stability and income, especially in volatile markets. This article solves 4 problems: understanding bond types, navigating the Fidelity platform, building a balanced portfolio, and avoiding common pitfalls. Let’s break down exactly how to buy bonds on Fidelity.

Buying bonds on Fidelity isn’t overly complicated, but it does require understanding the platform and the different types of bonds available. Here’s a breakdown:

1. Log into your Fidelity account: Obviously, the first step is to access your Fidelity account through their website or mobile app.
2. Navigate to the “Fixed Income, Bonds & CDs” section: Once logged in, look for a tab or menu option labeled something like “Investments,” “Trading,” or “Fixed Income.” Within that, you should find “Bonds & CDs.” Fidelity constantly tweaks its interface, so the exact wording might vary, but that’s the general area.
3. Explore bond offerings: This section will present you with a variety of bond types, including Treasury bonds, corporate bonds, municipal bonds (munis), and agency bonds. Each type has different risk and return profiles, so do your research.
4. Use the bond screener: Fidelity provides a bond screener to help you narrow down your choices based on criteria like maturity date, credit rating, coupon rate, and yield to maturity (YTM). This is a critical tool for finding bonds that align with your investment goals.
5. Research individual bonds: Before you buy anything, take the time to research the specific bond you’re considering. Look at the issuer’s financial health (if it’s a corporate bond), the bond’s credit rating (from agencies like Moody’s or S&P), and its yield to maturity.
6. Place your order: Once you’ve found a bond you like, click on it to view details and place your order. You’ll specify the quantity of bonds you want to purchase. Bonds are typically sold in increments of $1,000.
7. Review and confirm: Double-check your order details before submitting it. Pay close attention to the price, quantity, and any associated fees. Once you’re sure everything is correct, confirm the order.

Fidelity offers a wide array of bond types. It’s important to understand the differences before you start buying.

• Treasury Bonds: These are issued by the U.S. government and are considered very safe, as they are backed by the full faith and credit of the U.S. government. Treasury bonds have maturities ranging from 2 to 30 years.
• Corporate Bonds: Issued by corporations, these bonds generally offer higher yields than Treasury bonds but also carry more risk. The risk depends on the financial health of the issuing corporation.
• Municipal Bonds (Munis): Issued by state and local governments, munis offer the potential for tax-exempt income, which can be attractive to investors in higher tax brackets.
• Agency Bonds: Issued by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, these bonds are considered relatively safe, although not as risk-free as Treasury bonds.
• Certificates of Deposit (CDs): While technically not bonds, CDs are another fixed-income option available on Fidelity. They offer a fixed interest rate for a specific period.

When choosing between these, remember that higher potential returns typically come with higher risk.

Fidelity also provides access to bond funds, including bond ETFs and mutual funds. These offer a diversified portfolio of bonds in a single investment.

Bond Funds: Diversification and Convenience

Bond funds are actively or passively managed collections of various bonds.

• Diversification: Bond funds provide instant diversification, as they hold a basket of bonds, reducing the risk associated with individual bond defaults.
• Professional Management: Actively managed bond funds have professional managers making buy and sell decisions, which can potentially lead to higher returns (but also higher fees).
• Liquidity: Bond funds are generally more liquid than individual bonds, as you can buy or sell shares in the fund at any time during market hours.

Individual Bonds: Control and Predictability

Buying individual bonds gives you more control over your investment.

• Predictable Income: If held to maturity, individual bonds provide a predictable stream of income and return of principal.
• Customization: You can customize your bond portfolio to match your specific maturity preferences and risk tolerance.
• Potentially Higher Returns (in some cases): If you buy bonds at a discount and hold them to maturity, you could potentially earn a higher return than a bond fund.

I’ve been buying bonds on Fidelity for several years, and here’s what I’ve learned that you won’t necessarily find in their official documentation:

• The “New Issue” Market: Fidelity has a “New Issue” bond calendar. Keep an eye on it. New bonds coming to market often offer slightly better yields to attract initial investors. I’ve snagged some decent deals this way.
• Odd Lots: Don’t shy away from “odd lots” – bonds available in amounts less than the standard $1,000 increment. Sometimes, people need to sell off small portions of their holdings, and you can pick them up at attractive prices. Just be aware that liquidity can be lower for odd lots.
• Talk to a Fidelity representative: Seriously. They’re often very helpful in navigating the bond market and understanding the nuances of different offerings. I once got valuable insight into a specific municipal bond from a Fidelity rep that helped me make a better decision.
• Bond ladders: Consider building a bond ladder. This involves buying bonds with staggered maturity dates. As each bond matures, you reinvest the proceeds into a new bond with a later maturity date. This helps manage interest rate risk and provides a steady stream of income.

A bond ladder is a portfolio strategy that involves purchasing bonds with different maturity dates. This strategy helps to manage interest rate risk and provides a steady stream of income. Here’s how to create a bond ladder on Fidelity:

1. Determine Your Investment Horizon: Decide how long you want your bond ladder to last. For example, you might want a ladder that spans 5 years, with bonds maturing every year.
2. Select Maturity Dates: Choose the specific maturity dates for your bonds. If you want a 5-year ladder, you might select bonds maturing in 1 year, 2 years, 3 years, 4 years, and 5 years.
3. Allocate Funds: Divide your investment amount equally among the different maturity dates. For example, if you have $50,000 to invest and want a 5-year ladder, you would allocate $10,000 to each maturity date.
4. Purchase Bonds: Use the Fidelity bond screener to find bonds that match your desired maturity dates, credit quality, and yield. Purchase the bonds in the allocated amounts.
5. Reinvest Maturing Bonds: As each bond matures, reinvest the proceeds into a new bond with the longest maturity date in your ladder. This maintains the ladder structure and ensures a continuous stream of income.

While bonds are generally considered less risky than stocks, they are not risk-free.

• Interest Rate Risk: When interest rates rise, the value of existing bonds typically falls. This is because new bonds are issued with higher coupon rates, making older bonds less attractive.
• Credit Risk: The risk that the bond issuer will default on its obligations. Credit ratings (from agencies like Moody’s and S&P) can help you assess credit risk.
• Inflation Risk: The risk that inflation will erode the purchasing power of your bond income.
• Liquidity Risk: Some bonds, particularly those issued by smaller companies or municipalities, may be difficult to sell quickly.
• Call Risk: Some bonds are callable, meaning the issuer can redeem them before the maturity date. If interest rates have fallen, the issuer may call the bonds and reissue them at a lower rate, leaving you to reinvest at a less favorable yield.

To mitigate these risks, diversify your bond portfolio, stick to higher-rated bonds (if you’re risk-averse), and consider building a bond ladder.

Buying bonds on Fidelity can be a strategic move for building a diversified and stable investment portfolio. By understanding the different bond types, using the Fidelity platform effectively, and considering the risks involved, you can make informed decisions that align with your financial goals. Don’t be afraid to reach out to Fidelity’s representatives for assistance – they can provide valuable insights and guidance. Remember to regularly review your bond holdings and adjust your strategy as needed to stay on track.
As for me, I started by adding treasury bonds. After adding a mix of corporate bonds, municipal bonds, and agency bonds I now have a diverse portfolio.

Here are some frequently asked questions about buying bonds on Fidelity:

About us

Welcome to 45vdc.shop – Your Ultimate Resource for Stock Market & Loan Mastery! Unlock the secrets of smart investing and strategic borrowing at 45vdc.shop. Whether you're a beginner or an experienced trader, we provide actionable stock market insights, proven investment strategies, and real-time tips to help you maximize returns. Need financial flexibility? Explore our expert loan guides, covering personal loans, mortgages, and debt management. Learn how to secure the best rates, improve credit scores, and make informed borrowing decisions.

This author does not have any more posts.