In recent years, bond investors have been reaping the benefits of rising interest rates. Bonds are now offering higher yields than ever before, making the bond market more appealing than ever. As a result, investors are on the hunt for the best broker for bonds, and some new upstart brokers are even allowing investors to invest in partial bonds, enabling them to get started with virtually any amount of money.
Why Bonds Are a Great Option for Retirement Portfolios
Bonds are not as popular as stocks among individual investors because their potential return is generally lower. However, a bond promises a specific payout over its lifetime and is less volatile than a stock. These qualities make it an attractive option for retirement portfolios. While the best brokers for stock trading have slashed their commissions to zero, trading bonds may still cost a small commission.For example, Charles Schwab charges no commission on U.S. Treasurys and only $1 per bond for other types of bonds, with a $10 minimum. Fidelity also allows investors to buy U.S. Treasurys through auctions or on the secondary market for no commission. Other dollar-denominated bonds have a $1 per bond price with no stated minimum.Charles Schwab: A Low-Cost Option for Bond Trading
Charles Schwab is an attractive place to trade bonds due to its low commissions. The broker charges no commission on U.S. Treasurys and only $1 per bond for corporate and municipal bonds, with a $10 minimum. In addition to bonds, Schwab offers access to a variety of other tradable securities such as stocks, ETFs, mutual funds, options, and more. This makes it one of the best places to build an investment portfolio.For instance, when investing in U.S. Treasurys, there is no commission. On other types of bonds, the commission is just $1 per bond, which is relatively low compared to other brokers.Fidelity Investments: A Reliable Choice for Bond Investors
Fidelity is another great place to purchase U.S. Treasurys with no commission. Investors can also buy other dollar-denominated bonds such as corporate and municipal bonds at $1 per bond with no stated minimum amount. Foreign-denominated bonds have different fees and minimums.Fidelity offers a variety of other tradable securities and is known for its excellent customer support. This makes it a reliable choice for bond investors who want a one-stop-shop for their investment needs.Public: Allowing Investors to Buy Fractional Bonds
Public is a more recent entrant to bond trading and is particularly appealing to newer investors as it allows the purchase of fractional bonds. Investors can buy corporate or Treasury bonds with as little as $100. The broker charges $0.10 to $0.25 for every $100 face value in Treasurys and $0.35 to $0.50 for every $100 in face value of corporate bonds.Clients can also open a bond account with a $1,000 minimum investment. In addition to bonds, Public provides commission-free trading on stocks, ETFs, and options.Interactive Brokers: Offering Tiered Commissions
Interactive Brokers offers tiered commissions that can reduce costs for investors buying significant volumes of corporate bonds, municipal bonds, or Treasurys. For example, Treasurys cost 0.002 percent of the face value up to $1 million and half that rate above $1 million, with a $5 minimum at each level. Corporates cost 0.1 percent of face value for the first $10,000, with a $1 minimum, and amounts above $10,000 are charged at just one-quarter the base rate.Interactive Brokers also provides access to markets around the world and a broad range of tradable securities, including cryptocurrencies in cooperation with a business partner.Merrill Edge: A Convenient Option for Bond Trading
Merrill Edge offers trading in Treasurys, corporate bonds, muni bonds, and government agency bonds. Investors can buy Treasurys at auction or in the secondary market with no commission. Corporates, munis, and agency bonds are priced at $1 per bond, with a $10 minimum and a $250 maximum.Merrill also offers stocks and ETFs for no commission, and its affiliation with Bank of America makes it easy to consolidate financial assets.Webull: A Slick Financial App for Bond Trading
Webull is a sleek financial app that allows investors to trade a variety of securities, including stocks, ETFs, and bonds. Currently, the app offers trading in only Treasurys but plans to expand to corporates and municipal bonds in the near term.Pricing for Treasurys is based on the bond's maturity. Terms of less than one year are charged 0.07 percent, those from one to three years are charged 0.4 percent, and those longer than three years are charged 0.7 percent. In other words, a $1,000 bond would cost $0.70, $4, or $7, respectively, at each term. Webull is also rolling out fractional bonds in the short term, allowing investors to put smaller amounts to work.J.P. Morgan Self-Directed Investing: A Trusted Broker for Bonds
J.P. Morgan Self-Directed Investing offers trading on Treasurys in the secondary market as well as corporate bonds, munis, and agency bonds. Treasurys are traded commission-free. Corporates, munis, and agencies are charged $10 per trade for the first 10 bonds, with a fee of $1 per bond above that level.J.P. Morgan also offers commission-free trading on stocks and ETFs, and its affiliation with Chase Bank makes it easy to transfer money between the two. This provides investors with added convenience and flexibility.Bankrate has analyzed a range of firms to find the best online brokers for bonds, and these are our top picks. Each broker offers unique features and benefits, allowing investors to choose the one that best suits their needs and investment goals. Whether you're looking for low commissions, fractional bond purchases, or a wide range of tradable securities, there is a broker out there for you.