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Costs Associated With Bonds

“To get the highest yields when interest rates are rising, choose shorter-term bonds. Conversely, switch to long-term bonds when you believe that interest rates are going to drop.”

- Nancy Lloyd, author of
Simple Money Solutions

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.

 What is a Bond?

 Types of Bonds

 

 Bond Terminology

 

 Costs Associated with Bonds

 

 Tax Issues

 

 

 

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