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(Graphic: Charles Schwab)

According to the Schwab study, fifty-four percent of investors believe bond prices vary from broker to broker; and 94% of that group believes prices vary moderately or a lot.

So why aren’t these investors shopping around? Schwab’s study found that:
  • More than half (53 percent) of investors say they do not know how to get the best price on bonds;
  • 43% say it is too complicated to comparison shop for bonds and 47% say it is too hard to see what a bond costs.

“Investors who are focused on value shouldn’t be confused when it comes to bond investing because there are resources that can help. Technology has made the bond market far more transparent for investors, and savvy shoppers now have the ability to bargain shop for bonds,” said Crawford.

Crawford offers three tips for bond investors:
  • Ask your broker how he or she is compensated on your bond purchase, and make sure you understand any commissions or mark-ups built into the price (or yield) as well as any additional fees. Unless your broker has a standard mark-up policy, you should ask before every trade.
  • Shop around: compare bonds as well as prices. Just like prices for the same bond can vary from brokerage firm to brokerage firm, so can availability. Is your firm able to shop around on your behalf to find the best available bond for your needs, or do they focus on what they have in their own inventory? Doing a little homework to find the right bond and the right price can really pay off.
  • Tap into education: take advantage of industry resources, like SIFMA’s investinginbonds.com.

The retail bond market has evolved and clients now have much better access, pricing and guidance than ever before, adds Crawford. “Online platforms like Schwab BondSource® provide investors with valuable tools that can help bring greater clarity to the bond purchasing process. We want to make sure investors are aware that they have the ability to quickly and easily compare prices on the same bond across the different trading networks available to Schwab, and to research prices on bonds that are available from multiple dealers – and are not limited to just bonds in Schwab’s inventory.”

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