A broad range of individual bond choices, not just our own.
Through Schwab BondSource, you can access over 50,000 bonds from more than 200 dealers, including new-issue municipal and corporate bonds.1
The U.S. government issues Treasuries to pay for operations and fund the national debt.
Issued by corporations, these bonds generally offer higher yields (with greater risk) than government bonds.
These are debt securities that are issued by states, cities, counties, and public enterprises to finance government projects and other expenditures. Municipal bonds are usually exempt from federal and state taxes if you purchase them from issuers in your home state.
Agency bonds are issued by government-sponsored or government-owned enterprises such as the Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA).
Secured by real estate loans, these investments make payments to investors from the interest and principal paid on the underlying mortgages.
Help when you need it.
Whether you prefer one-on-one help from a Fixed Income Specialist or want to invest on your own, Schwab offers the resources to guide you along the way.
Work directly with a Fixed Income Specialist.
Our specialists can provide you with a strategy that's specific to you and your goals. Learn more about Fixed Income Specialists.
Learn from experts at the Schwab Center for Financial Research.
Stay at the forefront of modern investing with Kathy A. Jones, Senior Vice President and Chief Fixed Income Strategist, Schwab Center for Financial Research.
Find and manage fixed income investments.
Streamline your search for fixed income investments and simplify managing your trade decisions and portfolio with our easy-to-use fixed income resources.
New to bonds?
Investors often overlook bonds because they're more familiar with stocks. To understand bonds, start by understanding how they differ from stocks.
What exactly is a bond?
Both stocks and bonds are issued as a way to raise money. The difference is this: When you purchase stock, you become one of the company's owners. When you invest in a bond, you are one of the company's lenders. So you can think of a bond as an IOU, because that's what it is–a promise to pay back the money you've loaned, with interest.Primary differences between stocks and bonds
|Investment Objective||For growth and to outpace inflation.||For stability, diversification, and income.|
|Risk||Higher. Principal values can be volatile. In the case of bankruptcy liquidation, stockholders receive their payment after bondholders and other creditors.||Lower. Principal value is generally less volatile than stock prices. However, all bonds are susceptible to interest rate risk, credit risk, and default risk.|
|Income||Some pay quarterly and special dividends.||Most pay a fixed amount of income to holders each year.|
|Ownership||Ownership in the company. Depending on stock type, shareholders could have voting rights.||No ownership. Bondholders do not have voting rights.|
|Trading||Trade through a centralized exchange, which consists of competing buyers and sellers.||Most bonds trade over-the-counter (OTC)—that is, between bond dealers without the use of a centralized exchange.|
|Return of Principal||Stocks do not promise to return principal.||Most bonds promise to return principal on a stated maturity date.|
How bonds are paid out.
$30,000 Bond face value
5% Bond interest (coupon) rate
$1,500 Annual interest payment
($750 Semiannual payments)
Face value: A bond's face value is the amount the issuer is obligated to pay back when the bond matures. For most bonds, the face value is $1,000 and never changes.
Interest rate: Sometimes called the "coupon rate," this is the percentage of the bond's value the issuer agrees to pay the bondholder each year. Interest rates can be either fixed or variable, and most bonds pay interest twice a year.
Maturity date: This is the date on which the issuer has promised to pay back the face value of the bond. Maturities can range from a few weeks to 30 years or more. For some bonds, the issuer reserves the option to pay off the bond before the maturity date. These are referred to as "callable" bonds.
Primary market: This is where newly issued securities are sold. When you buy a new issue in the primary market, you pay the new-issue offering price, which is the same for all buyers.
Secondary market: This is where previously issued bonds are traded between dealers and investors, including institutions. Bond prices are allowed to float at prices set by the market.
Yield to maturity: This is the bond's expected annual rate of return if you hold it to maturity. It includes interest payments and reflects any gain or loss you may realize if you purchase.
Consider bond laddering to balance between income and risk.
A bond ladder is a portfolio of individual bonds with different maturity dates. The staggered maturity dates help reduce risk if interest rates fluctuate. And since many bonds generally pay out twice a year on dates that coincide with their maturity date, monthly bond income can be structured around those dates.
Learn More About How Bond Ladders Work
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Clients of independent investment advisors: You may also contact your advisor or call Schwab Alliance at 800-515-2157.
1. Availability on Schwab BondSource as of January 2016.
Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.
In the bond market there is no centralized exchange or quotation service for most fixed income securities. Prices in the secondary market generally reflect activity by market participants or dealers linked to various trading systems. Bonds available through Schwab may be available through other dealers at superior or inferior prices compared to those available at Schwab. All prices are subject to change without prior notice.
Schwab reserves the right to act as principal on any bond transaction. In secondary market principal transactions, the price will be subject to our standard markup in the case of purchases and a markdown in the case of sales and also may include a profit to Schwab in the form of a bid-ask spread.
Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.
When trading as principal, Schwab may also be holding the security in its own account prior to selling it to you and, therefore, may make (or lose) money depending on whether the price of the security has risen or fallen while Schwab has held it.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.