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Author: imcharliehm Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Buying bonds as a beginner Date: 6/17/2001 9:15 PM
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Structurally, bonds are more complicated than stocks [though their research requirements in terms of fundamentals are equivalent], but, because they mature, they can be easier and safer for beginners (and most investors). Furthermore, they can offer equity-like returns if you're willing to take on equity-like risks [i.e., less than investment-grade issues.]

From my experience with Schwab, Waterhouse, and CSFB, E*trade is the easiest to deal with in terms of 24/7 functionality and depth and breadth of inventory [They offer junk bonds; the others don't].


Suggestion: Spend some time reading before you start buying. [Sharon Wright's "Getting Started in Bonds" is the best of the introductory books, IMHO, and then take a look at Fabozzi's "The Handbook of Fixed-Income Securities." You don't have to grind through all 1400 pages. Just read the chapters that apply to what you're attempting.]

Another suggestion: Forget about ladders. Just buy whatever is the best value for your risk-tolerance and time-frame and let the scheduling of the coupons fall where they may. Also, now is a lousy time to start buying, because interest rates have fallen so much [meaning, prices are high across all credit categories compared with even a year ago.]

Lastly, figure out how you intend to size your positions and manage default risks before you buy anything. This stuff isn't rocket science, but you need to know why you are getting into each trade and how you plan to exit if need be.

And, lastly-lastly, don't hestiate to bid under the offer with a limit order. You won't always get a fill, but often enough to make it worth your while.

Best wishes, Charlie
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