How Does Buying Bonds Work Today

The type of bond you buy determines your risk and potential tax benefits:

: Issued by companies. These offer higher yields but carry more risk if the company cannot pay its debts. 3. How to Buy Bonds You can purchase bonds through three main channels: What is a Bond and How do they Work? - Vanguard how does buying bonds work

: Issued by states or cities. Interest is usually federal tax-exempt and often state tax-exempt if you live in the issuing state. The type of bond you buy determines your

: Most bonds pay fixed interest twice a year. For a $1,000 bond with a 5% coupon, you receive $50 annually until it matures. How to Buy Bonds You can purchase bonds

: Backed by the government and considered the safest. Interest is exempt from state and local taxes.

: If you buy a bond at a discount (below its face value) or sell it for more than you paid before it matures, you earn a profit. 2. Choosing Your Bond Type