How to Buy Corporate Bonds on Fidelity: A Guide for Beginners
Investing in bonds can be a smart way to diversify your portfolio while potentially generating a steady stream of income. Corporate bonds, in particular, offer investors the opportunity to lend money to corporations in exchange for interest payments and the return of principal at maturity. Fidelity is a well-known brokerage that provides a platform for purchasing corporate bonds. If you are a beginner in bond investing, this article will guide you through the steps of buying corporate bonds on Fidelity.
What are Corporate Bonds?
Corporate bonds are debt securities issued by companies to raise capital. When you purchase a corporate bond, you are essentially lending money to the issuing company in return for periodic interest payments, known as coupon payments, and the repayment of the bond’s face value at maturity. Depending on the company’s creditworthiness, the risk and return of corporate bonds can vary, so it is important to do your research before investing.
Why Invest in Corporate Bonds?
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Income Generation: Corporate bonds typically pay higher interest rates compared to government bonds, providing a reliable income stream.
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Diversification: Adding bonds to your investment portfolio can reduce overall risk, as they often behave differently than stocks.
- Potential for Capital Preservation: If held to maturity, you can receive your principal back, assuming the issuer does not default.
Steps to Buy Corporate Bonds on Fidelity
Step 1: Open a Fidelity Account
Before buying corporate bonds, you must have a Fidelity brokerage account. If you don’t already have one, follow these steps:
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Visit the Fidelity Website: Go to Fidelity’s homepage.
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Click on ‘Open an Account’: Follow the prompts to choose the type of account you want to open (individual brokerage, retirement, etc.).
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Provide Your Information: Fill out the required personal details, including your Social Security number, contact information, and employment details.
- Fund Your Account: Transfer money to your new account using a bank transfer or check.
Step 2: Research Corporate Bonds
Before making a purchase, it’s essential to research the corporate bonds that interest you. Here are some tips:
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Check Credit Ratings: Look for ratings from agencies like Moody’s, S&P, or Fitch to assess the creditworthiness of the company.
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Review the Financial Health of the Issuer: Analyze the company’s financial statements, debt levels, and overall market position.
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Consider Maturity Dates: Corporate bonds come with various maturities, ranging from short-term to long-term. Decide what fits your investment goals.
- Understanding Yield: The bond’s yield indicates how much income it will generate over time. Compare yields among different bonds and consider the risks involved.
Step 3: Navigate Fidelity’s Bond Center
Now that you are ready to invest, follow these steps to navigate Fidelity’s system:
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Log In to Your Account: Access your account on the Fidelity website.
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Go to ‘Fixed Income’: Navigate to the ‘Research’ tab and select ‘Fixed Income’ or search for ‘bonds’ in the search bar.
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Use the Bond Screener: Fidelity has a user-friendly bond screener that allows you to filter bonds based on criteria like credit rating, yield, and maturity date.
- Select Your Bonds: Once you find a bond that meets your investment criteria, click on it to view more details, such as price, coupon rate, and payment schedule.
Step 4: Place Your Order
To buy your chosen corporate bond:
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Select ‘Buy’: On the bond’s details page, click on the ‘Buy’ option.
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Enter Order Details: Specify the amount you wish to purchase and review the order details, including any fees.
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Review and Confirm: Double-check your order, and if everything looks correct, confirm your purchase.
- Monitor Your Investment: After the purchase, keep an eye on your bond investment and stay informed about the issuer’s financial health.
Conclusion
Buying corporate bonds on Fidelity can be a straightforward process for beginners and provides an excellent opportunity to diversify your investment portfolio with fixed-income securities. By understanding the basics of corporate bonds, conducting thorough research, and following the steps outlined above, you can confidently navigate the bond market. Always remember to review your financial goals and risk tolerance before making any investment decisions.
Happy investing!
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Here is the overview for Bond Beginners:
1. Bond Basics
What A Bond Is & How A Bond Works
Why Invest In Bonds
New Issue vs Secondary Market Bonds
Interest Rates & Bond Prices
Current Yield & Yield To Maturity
Always Remember This!
Buying At Par, Above Par & Below Par
Different Types Of Bonds
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2. The Risks Of Bond Investing
Seven Key Bond Risks
Credit Risk
Interest Rate Risk
Reinvestment Risk/Call Risk
Inflation Risk
Liquidity Risk
Currency Risk & Country Risk
Bond Risk Mitigation Strategies
Wrap-Up
3. US Treasuries Overview
What Are US Treasuries
Why Invest In Treasuries
Where Can You Buy Treasuries
How Are Treasuries Taxed
Wrap-Up
4. Treasury Bills
What Are Treasury Bills (T-Bills)
When Do T-Bill Auctions Happen
Where Should You Buy At Auction
Auto-Roll When Buying At Auction
Where To Find Recent Auction Results
High Rate vs Investment Rate
Reopening Auctions
Cash Management Bills (CMBs)
Buying & Selling On Secondary Market
Wrap-Up
5. Treasury Notes & Bonds
What Are Treasury Notes & Bonds
When Do Auctions Happen
Buying Treasury Notes & Bonds
Auction High Yield vs Interest Rate
Floating Rate Notes (FRNs)
Treasury Zeros (STRIPS)
Wrap-Up
6. TIPS (Inflation-Protected)
What Are TIPS
When Do TIPS Auctions Happen
Nominal vs Real Yields
Negative Yields
How Do You Adjust TIPS For Inflation
Taxes On Phantom Income
Secondary Market Liquidity
Wrap-Up
7. I-Bonds (Inflation-Protected)
What Are I-Bonds
How Does I-Bond Interest Work
I-Bonds vs TIPS
The Annual I-Bond Limit
Wrap-Up
8. Agency Bonds
The Universe Of Bonds
What Are Agency Bonds
How Are Agency Bonds Taxed
Treasuries vs Agencies
Who Might Want To Consider Agencies
Yield-To-Call & Yield-To-Worst
Where Can You Buy Agency Bonds
Wrap-Up
9. Municipal Bonds
Our Bond Universe Gets More Complex
What Are Municipal Bonds
How Safe Are Munis
How Are Munis Taxed
The De Minimis Rule
Social Security & Medicare Premiums
Treasuries, Agencies & Munis
Who Might Want To Consider Munis
Wrap-Up
10. Corporate Bonds
Our Bond Universe Is Complete
What Are Corporate Bonds
How Safe Are Corporates
Corporate Bond Hierarchies
Five Key Features Of Corporate Bonds
How Are Corporates Taxed
Treasuries vs Corporates, Etc.
Who Might Want To Buy Corporates
Wrap-Up
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Here is the overview for Bond Masters:
1. Stocks vs Bonds
Historical Performance
Are Bonds Really Less Volatile
Why Invest In Bonds
Accumulation vs Decumulation
Allocation of Stocks vs Bonds
Wrap-Up
2. Which Bonds Might Be Right For You
Treasuries & Other Types of Bonds
Nominal vs Real Yields
Inflation vs Non-Inflation-Protected
Taxable vs Tax-Advantaged Accounts
Wrap-Up
3. Bond Ladders & Other Bond Strategies
Normal vs Inverted Yield Curve
What Is A Bond Ladder
5 Important Bond Laddering Questions
Laddering When Rates Are Rising
Laddering When Rates Are Falling
Laddering When Rates Are Uncertain
What Is A Bullet
What Is A Barbell
Wrap-Up
4. Holding to Maturity vs Selling Early
Why Hold to Maturity
When To Sell Early Before Maturity
Tax Implications Of Selling Early
Wrap-Up
5. Individual Bonds, Bond Funds, Etc.
Why Buy Individual Bonds
Why Buy Bond Funds
Bond Fund Considerations
Key Bond Fund Concepts
CDs vs Treasuries
Other High-Yield Investments
Wrap-Up
6. Our B.E.S.T. Model Portfolios By Age
Our B.E.S.T Model Portfolios By Age
Model Portfolios In The Industry
B.E.S.T Model Portfolio Difference
How Much Do You Need To Retire?
How I Use The Rules of 100, 110, & 120
B.E.S.T Model Portfolios (20s)
B.E.S.T Model Portfolios (30s & 40s)
B.E.S.T Model Portfolios (50s & 60s)
B.E.S.T Model Portfolios (70s+)
Wrap-Up
7. The Decumulation Phase
What Is The Decumulation Phase?
Bear Markets & Recessions
What Can You Do In Bad/Bear Markets
Decumulation Tax Considerations
The 4% Rule
The Bucket Strategy
The Flooring Approach
Jen’s Bucket Strategy With A Twist
Wrap-Up
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SOURCE: https://www.fidelity.com/
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I did the Fidelity course this afternoon. It was very different than Bond Masters for sure.