Buying individual bonds - taking the plunge

[disneysteve]

We do have around 10% in bonds I believe. I misunderstood your initial post. I thought you were buying savings bonds, where you had to hold on to them for a certain amount of time.

No, I was talking about either government or corporate bonds, bought and sold on the open market. I don't plan on selling the ones I just bought but rather holding until maturity.

[Singuy]

Only bond I would probably mess with are high yield muni bond ETF as the interest is tax free and the interest is not terrible. However I still wait until fed raise rates to 2%+ before diving into bonds. If you are holding it to maturity than it's no better than a CD but a slightly higher interest.

[QuarterMillionMan]

Disneysteve thanks for posting this thread. I will be looking into corporate bonds (ie, Apple, Home Depot, Coke, etc). I always thought I would need a bond broker but I see I can buy through my stock brokerage account. Easy as pie.

[disneysteve]

Disneysteve thanks for posting this thread. I will be looking into corporate bonds (ie, Apple, Home Depot, Coke, etc). I always thought I would need a bond broker but I see I can buy through my stock brokerage account. Easy as pie.

Yep. Pretty much any brokerage account should give you access: Vanguard, Fidelity, Schwab, TD Ameritrade, etc. And they usually have tools to help you search for bonds that meet whatever criteria you set regarding maturity, rating, etc.

[QuarterMillionMan]

Lots to learn what all the numbers and abbreviations mean but Apple with AA+ or Home Depot w/grade A looks good to me.

[disneysteve]

Lots to learn what all the numbers and abbreviations mean but Apple with AA+ or Home Depot w/grade A looks good to me.

Just remember that the longer the maturity, the more sensitive to interest rate changes. If you plan to hold until maturity, you'll still get that rate, though that also means 4 years from now you could be holding a bond paying 1.45% when rates have gone up to 3% or more. The value of that bond will have fallen because who would want to buy that then?

[QuarterMillionMan]

Good to know, thanks. I'd probably follow your strategy with 1-3 year maturity.

[LivingAlmostLarge]

Why are you buying bonds over dividend paying stocks?

[disneysteve]

Why are you buying bonds over dividend paying stocks?

It's not instead of stocks. Our AA is 65/25/10. We invest in stocks and bonds and maintain our cash accounts.

We also invest in VYM, Vanguard's High Dividend Yield ETF as part of our stock allocation.

[QuarterMillionMan]

Disneysteve what are the fees or commission when buying bonds?

[QuarterMillionMan]

I'm looking at a 1 year Delta Airlines bond, maturity date 3/15/22, for $10,215, YTM 1.575%, YTW 1.377%. But I don't see the fees or commissions.

[disneysteve]

QMM, unless your broker charges a separate fee, I believe the price listed is the price you pay. In your case, that would be the $10,215.09. The "commission" is baked into the price. There was no separate commission on the purchase I just made.

You can find out for sure by proceeding through the order process but not clicking the final confirmation until you're ready to complete the transaction. See if any additional fee shows up. Let me know if it does.

ETA: It looks like you're also on TD Ameritrade, same as me, so yes, no commission. The price listed is the price you pay.

[QuarterMillionMan]

Ok thanks. But the warning at the top is scaring me so I'll keep shopping around for other less riskier bonds.

[disneysteve]

Ok thanks. But the warning at the top is scaring me so I'll keep shopping around for other less riskier bonds.

It looks like that bond has a rating of Baa, so it is somewhat higher risk, but it also matures in under a year which reduces the risk unless you have reason to think that Delta is going to be in a position between now and next March where they'll start defaulting on their debts.

[james.hendrickson]

Ok thanks. But the warning at the top is scaring me so I'll keep shopping around for other less riskier bonds.

QuarterMillionMan What I find amazing about this is that bonds are significantly less risky than stocks, all things being equal. Yet, the market in general does not seem squeamish when it comes to shoveling money into stocks. Yet, when people talk about bonds, you almost inevitably hear a lot of complaints about risk.

Apologies if I'm being critical here - its a pet peeve of mine.