If you’re looking to buy bonds, one option is to find a bonds broker who offers commission-free transactions. These brokers receive a percentage of the dealer markup or markdown for the transaction, and the cost of a transaction is calculated according to how many units you buy and sell. Some brokers also charge a flat fee based on the size of your account or the amount of trading you do. If you’re an experienced investor, you can ask them questions about pricing and how they calculate their commissions. A good broker will be able to explain the costs and how they relate to the size of your portfolio. If you can’t afford that, you can always try to negotiate with them.
When you find a bonds broker, make sure they’re registered and have the proper credentials. If you’re not familiar with the various types of brokerages, it’s a good idea to talk with multiple brokers to see which one is right for you. Check whether the broker’s experience is sufficient to handle your needs. If you’re not sure, ask to meet his or her references. It’s essential to get a referral from an existing customer.
A bond broker earns a profit by reducing the spread, which is the difference between the buy and sell price. The broker keeps this spread as their profit, which is built into the price of the bond. There’s no requirement for brokers to disclose this income. The only requirement for a bond broker is that they earn a fair and transparent spread. A broker may earn a higher commission than you’d expect from a bank, but the amount you’ll have to pay will likely be small in comparison.