How to Purchase Municipal Bonds
Choose whether you want to purchase general obligation bonds or revenue bonds., Select a brokerage firm., Research the details., Communicate with your broker.
Step-by-Step Guide
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Step 1: Choose whether you want to purchase general obligation bonds or revenue bonds.
A general obligation bond pays for a particular project.
Revenue bonds can be used for various purposes, like funding schools and parks.
General obligation bonds are guaranteed by the government issuing them.
Revenue bonds are not 100-percent secured by the issuing government. -
Step 2: Select a brokerage firm.
The National Association of Securities Dealers (NASD) has listings of brokerages and brokers.
Some brokerage firms might be part of a larger financial institution such as a bank.
You can contact your bank for assistance in the selection process.
To avoid some brokerage fees, you can find out if your local government offers an early-purchase period for individual investors.
You would be able to purchase bonds directly without going through a broker. , Know the face value, interest rate, and time to maturity of any bond you want to buy.
The face value is what the bond will be worth when it comes due ("matures").
For example, you might pay $25 for a bond with a face value of $50.
The interest (or "coupon") rate is the percentage of the face value that is payable in interest each year.
Besides annual interest, a bond may make additional payments on a semi-annual or monthly basis.
The maturity date is when the face value of the bond must be paid (in addition to any interest).
A bondholder could incur penalties (loss of income) by trying to redeem a bond before its maturity date. , Let him/her know your financial situation and investment interests.
This will dictate the type and number of bonds you should invest in. -
Step 3: Research the details.
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Step 4: Communicate with your broker.
Detailed Guide
A general obligation bond pays for a particular project.
Revenue bonds can be used for various purposes, like funding schools and parks.
General obligation bonds are guaranteed by the government issuing them.
Revenue bonds are not 100-percent secured by the issuing government.
The National Association of Securities Dealers (NASD) has listings of brokerages and brokers.
Some brokerage firms might be part of a larger financial institution such as a bank.
You can contact your bank for assistance in the selection process.
To avoid some brokerage fees, you can find out if your local government offers an early-purchase period for individual investors.
You would be able to purchase bonds directly without going through a broker. , Know the face value, interest rate, and time to maturity of any bond you want to buy.
The face value is what the bond will be worth when it comes due ("matures").
For example, you might pay $25 for a bond with a face value of $50.
The interest (or "coupon") rate is the percentage of the face value that is payable in interest each year.
Besides annual interest, a bond may make additional payments on a semi-annual or monthly basis.
The maturity date is when the face value of the bond must be paid (in addition to any interest).
A bondholder could incur penalties (loss of income) by trying to redeem a bond before its maturity date. , Let him/her know your financial situation and investment interests.
This will dictate the type and number of bonds you should invest in.
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