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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35365  
Subject: Re: Corporate Bonds - Where to start? Date: 7/29/2010 10:38 AM
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Welcome,

I think you have come to the right place. One good place to start is our FAQ, it isn't perfect but it is a really good place to start.

You cannot purchase corporate bonds through your bank. You can buy US I-bonds and E-bonds.

No you do not need to talk to anyone special. If you have a brokerage account most likely you have access to buying bonds electronically as you do stocks, mutual funds and ETFs. Part II of that is that some brokers offer access to a much broader inventory then others. The more bond shopping you want to do the more you are going to want access to greater inventory. The last time we discussed this E*trade and I believe Interactive Brokers offered the best access with reasonable customer service.

You said you have an E*Trade account so you are starting in a pretty good place.

I am not a fan of bond funds. I believe that if you have the time and are willing to pick up a few skills that you can do better buying your own bonds. This opinion is not universally accepted here on this board any more than it is any where else. What I do want to share is that I believe a bond fund is not the equivalent of a bond; bonds mature, bond funds do not, I believe that difference is crucial. To adequately support this position takes a long thread of its own which allows those that disagree with my position to point out where they believe it is flawed.

Bonds are not mysterious, they are quite simple instruments, much easier to price than stocks. They are a pain to shop for for two reasons: first, not all bonds issued by one company are the same. It is possible to buy a 5 year bond from JNJ that was originally issued 15 years ago, it will be listed right beside the five year bond they just issued they aren't the same; whereas JNJ stock is JNJ stock. The second part is that the industry is built to cater to large institutional buyers/traders like mutual funds, insurance companies, retirement funds . . . and shows little inclination to improve their services for us small fries.

If you want to learn how to buy bonds then be prepared for some shopping/trading frustrations. If you are comfortable buying stocks you will find buying bonds clunky and annoying. After that, due diligence is due diligence, a firm can either pay its bills or it cannot. The good news is that on the bond side we don't care if the company has to cut the dividend or go earnings negative for 6 straight quarters what we need to see is the ability to continue to finance its debt.

I would suggest that you don't bother with the "bonds for dummies" type books for additional reading. They will not tell you any more than spending a day google'ing and reading investopedia.

http://www.amazon.com/Strategic-Bond-Investor-Strategies-Unl...

Is an updated version of one of my favorites. It is not light and fluffy reading nor is it inaccessible by the novice.

http://www.amazon.com/Bonds-Now-Making-Income-Landscape/dp/0...

Is on my too do list. Everything I've read or listened to by Ms. Cohen smacks of common sense plus knowledge.

I'm sure some other folks have some favorites to share.

Good luck and please bring your questions here so that we can all learn

jack
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