Top Online Bond Brokers

Bond ETFs:Bond Funds:Bond Market
Research Tools:Market Analysis:Fixed Income
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Conventional wisdom has held for many years that investing in bonds is generally considerably a lower risk activity than comparably investing in stocks. Certainly bonds do provide an interesting level of diversification in any investor portfolio. Above is our list of brokerage firms that provide the best and most dependable service in and access to bonds with the best commisisons and spreads, along with simple to utilize bond trading and research tools that are highly effective in selecting the best issues for your own holdings.

What Is a Bond?

Bonds are best described as loans that investors make to governments and firms. The holder of the bond then obtains a regular and specifically pre-determined schedule of interest payments on the principal that he has loaned out to the borrower along with the eventual return of the full principal at the end of the bond term. This makes them completely different from stocks that are acutal equity investments that individuals, businesses, and institutions pour into a company with a hope of receiving dividend payments back and realizing price appreciation in the underlying shares of the corporation.

Types of Bonds

There are three principal different types of bonds that investors can choose between or otherwise can mix and match. These include the following:

  • Corporate BondsĀ – companies will issue debt in the form of bonds to help fuel expansion, operations, and cover other expenses. These types of bonds commonly come with a greater coupon rate thanks to the (in theory) greater chance of a default risk present with corporations than with government entity issued bonds
  • Municipal Bonds – local, municipal, and state governments issue this kind of paper in order to pay for expansion projects and to cover other unforeseen expenses. Many of these bonds can be had as tax-exempt which helps to sell them to investors. It is common to refer to municipal bonds by their abbreviated moniker of munis
  • Government Bonds – sovereign governments will issue government bonds to cover costs. These are commonly referred to as Treasury Bonds in the U.S. (or just as Treasuries) and Gilts in the U.K. Government bonds commonly get the highest AAA ratings, equating them with the highest degree of safety since a national government has issued them

What Is a Bond Ladder?

Bond ladders are overlaid assortments of such fixed income securities that come with a range of maturity dates. Such maturity dates of CDs and bonds take place in regular increments of time and investors can overlay these in such a way as to establish a structure like a ladder. Such bond ladders typically mix bonds that come with lower and higher risk so that higher dependable income payments will be received all the while the total risk of the bond portfolio is reduced.

What is a CUSIP number?

In 1962 a committee came together to codify a unified system that became implemented in 1967 for identifying securities. These securities then included United States and Canadian registered munincipal bonds, U.S. government bonds, and stocks. CUSIP is the acronym for Committee on Uniform Securities Identification Procedures. The codification of the bond securities went a long way in helping to demystifying bond investing and bringing it to the smaller, retail investor community.

Important Criteria for Bond Broker Services

  • Individual Bonds – there are literally hundreds of thousands of individual bonds available on the markets today. The best bond brokers will offer access to the largest assortment of them possible to give you a greater variety of investing choice
  • Bond ETF’s – a great way for many investors to ease their way into bonds, Bond ETFs are quite literally exchange traded funds that come naturally pre-diversified into a large collection of bonds arranged according to a certain commonality or criteria. This could be corporate bonds, U.S. Treasuries, or municipal bonds. The greatest advantage of the ETFs besides their inherent diversification is that they provide interest payouts on a monthly basis in the form of dividends instead of requiring that you wait six months to receive your payments as with holding an individual bond issue
  • Bond Funds (Mutual Funds) – Exchange Traded Funds (ETFs) invest in an underlying group of securities as an index. In this case, the bond funds are only buying into bonds whether they are municiapal bonds, corporate bonds, or U.S. Treasuries bonds. One huge advanage of these particular ETFs is that they also pay out monthly interest in the form of dividends instead of making you wait every six months to collect your coupon payment (that is the typical individual bond requirement for time frame on payouts)
  • Bond Market News – It is essential to have good intelligence on any underlying bond issue that you are seriously considering investing in. Investing in bonds without bond market news is like driving a car when blind. Fortunately most any reputable bond trading firm will provide this as a standard service to its account holders
  • Bond Trading Data – A useful if not essential data feed for traders of bonds is the bond trading data that reveals such important information as open contracts and other essential statistics on supply, demand, and interest yields
  • Research Tools – Good bond trading operations are going to offer a variety of good, high quality screening tools that help you to research the right bonds for your account. This becomes essential ingelligence to have in a world where most of the bond trading desks are offering you choices ranging from literally hundreds to even thousands of individual bonds, bond ETFs, and bond funds nowadays
  • Market Analysis – Most every reputable bond trader will provide access to some form of analysis on bonds, either from their own in-house team or from the likes of the industry gold standard Morningstar reports (uinversally highly respected in this industry for the quality of their research)
  • Fixed Income Specialists – A bonus attribute for a bond trading desk is to offer you expert advice either from over the phone or at an in-branch network with their bond speciaists. This should not be dismissed out of hand or taken lightly for people new to trading bonds as it can make the difference between sleeping well at night and taking unnecessary losses in early forays into the bond trading universe
  • Commission Free Offerings – These days, many reputable bond trading outfits have mostly reduced and often times even eliminated the commissions that they charge on many of their top bond trading products, though not every good outfit has done this as the chart above reveals

Top Rated Online Bond Brokers

Below is our list of the top rated online bond brokers in the industry today with some good information on each of them. They are also profiled in detail above in the chart at the top of this page.

  1. Charles Schwab – Schwab has a long and storied reputation in the online trading business in general. They do not disappoint in the world of bond trading either, providing transparent and low pricing as well as a vast selection of bond funds, individual bonds, and bond ETF’s. Their crowning achievement though has to be the company’s unique feature of offering the advice of their fixed income speciailsts, something that no one else in the bond broker industry is offering by way of competition at the time of publication. They also standard offer an inpressive array of resources, data feeds, and tools for those investors who are self trading their own bond accounts. Schwas earned its envied reputation in this business with good reason
  2. Interactive Brokers – IB is a highly respcted discount brokerage firm online that makes it easy for you to combine all types of financial instruments’ trading in a single account that can include everything from stocks, bonds, and ETFs, to commodities and futures. The company’s commitment to transparent and fair pricing on bonds includes no mark ups for bond prices and completely transparent and low commissions for bonds. IB offers an impressive array of bonds including over 26,304 corporate bonds, over 1,010,842 municipal bonds, a full lineup of U.S. Treasuries, and over 22,011 CD’s just for good measure. Their platform provides a direct link access to both U.S., European, and Canadian bonds as well as sovereign bonds in Asia. This includes Client Bond Quotes for Live Trading – the clients at IB are able to watch and assign bid and offer orders on U.S. Treasuries thanks to their ingenuis system. It is a truly impressive setup from a supposedly straight discount online brokerage firm
  3. Ally Invest – Ally Invest boasts a storied and extensie history of providing some of the best commissions on bonds (as well as options, stocks, and mutual funds). The company is large enough to serve as principal on a number of fixed income securities. The company also delivers fantastic tools for researching and locating appropriate bonds like the Bond Calculator and the Bond Finder. With the Bond Calculator, you are able to ascertain the bond’s value utilizing its description. Meanwhile the Bond Finder assists investorss in selecting the kinds of bonds in which they are personally and specifically interested and then also works to filter them down to a more reasonable safety level that provides the great tax advantages of municipal bonds. You can also input other features like time horizon and intended investment amount. The Bond Ladder Builder is another excelent tool that enable you to add as many as 21 rungs in ladders to the Bond Ladder so that bond payments can be overlaid and overlapped effectively and efficiently
  4. Etrade – Starting to trade bonds with etrade is a matter of clicking on the link to bond news and analysis. A yield grid then appears benearth the news link. Aside from municipal and corporate debt issues they also reveal all of the relevant information on U.S. Treasuries. All yields and their corresponding maturities are provided by hyperlinks. Etrade’s system is impressive as well coming from a deep discount online brokerage operation and setup that deserves its fvaorable reputation in the industry
  5. TD Ameritrade – TD Ameritrade prides itself on its considerable variety of no-commission ETFs (over 100 of them) and fee-free mutual funds (over 3,580 of them). So that you do not get bogged down in this impressive variety and to help you make sense of it all, the company provides its account holders with its helpful fund screener that permits you to compare the performances of various mutual funds, ETFs, and closed end funds. They also deliver the goods big time with their leading Trenidng on Twitter stock score as well as on other social media sites. With TD Ameritrade’s over 3,000 bond mutual funds, 360 bond ETF’s, and large variety of secondary and primarily issued debt securities, there is much to like here. Costs for investing into these fixed income investments are competitive with the other major onnline brokerages, especially with the company’s standard ETF commission- free offerings
  6. Fidelity – Those investors who are looking for the ability to trade a good range of bonds, bond ETFs, and bond funds will undoubtedly find Fidelity to be a useful brokerage option and partner for their bond trading endeavors. The company distinguishes themselves from the competition by their trading data and complete lineup of research and screening tools that includes access to issuer data and bond market news. Their top mix of high quality retirement planning tools, impressive investment product mix, and award winning retirement planning services make them a popular choice for fixed income investment investors consistently. The commissions at Fidelity are not the cheapest accordingly. Yet their fees are still competitive enough to make them true contenders with the less expensive brokers in the industry. Fidelity wins huge points for their impressive range of advisory and retirement services, complete with leading customer service and investing tools. Potential bond investors should give them a serious look