Costs Associated With Bonds

Bonds are traded in the market just like stocks, and you will need to pay a broker a commission whenever you buy or sell a bond. There is, however, one exception. You may purchase U.S. Treasury securities directly through the Treasury Direct program of the Federal Reserve System, in which case you can avoid dealing with a broker altogether and paying anything other than the bond’s purchase price. For more information on Treasury Direct, contact your nearest Federal Reserve Bank branch or call the Bureau of Public Debt at (202) 874-4000.

Another way to purchase bonds is through bond funds. In many cases, you can purchase them directly from the mutual fund company and avoid a sales commission. However, bond funds do charge an annual fee for maintenance and money management. Check out the fund’s expense ratio to ensure it’s not prohibitively expensive–compared to historical returns–before you buy.