Brokerage Firms Offering Municipal and Corporate Bonds
| Broker |
Rating |
Broker Bonds Fee |
Corpo
rate |
Munic
ipal |
New Account Promotion |
| Ally Invest |
| $0 per bond, $14.95 minimum | Yes | Yes |
Up to $3,500 cash bonus + $0 commission trades for new accounts.
|
| TD Ameritrade |
| On a net yield basis | Yes | Yes | Trade stocks and ETFs for free + get up to $600 bonus.
|
| Charles Schwab |
| $1 per bond, $10 minimum, $250 maximum | Yes | Yes | Make $100,000 deposit and get 500 commission-free online equity and options trades.
|
| Choicetrade |
| NA | NA | NA | None |
| Cobra Trading |
| NA | NA | NA | None |
| Etrade |
| $1 per bond, minimum $10, maximum $250 | Yes | Yes |
At E*TRADE, get $0 trades + 65₵ per options contract. |
| Fidelity |
| $1 per bond, $250 maximum; $50 maximum if maturing in one year | Yes | Yes | Get 500 free trades with $100,000+ deposit.
|
| Firstrade |
| On a net yield basis | Yes | Yes | $0 commissions + up to $200 in transfer fee rebates. |
| Interactive Brokers |
| 0.1%* Face Value (10 bps) if <= $10,000 Face Value; 0.025%* Face Value (2.5 bps) if > $10,000 Face Value | Yes | Yes | Open account and get $200 for a friend you refer. |
| Just2trade |
| $15 + $1 per bond | Yes | Yes | None |
| Kapitall |
| NA | NA | NA | None |
| Merrill Lynch/Edge |
| On a net yield basis | Yes | Yes | None |
| Motif Investing |
| NA | NA | NA | None
|
| Muriel Siebert |
| 100 bonds or more - $2.50 per bond, from 50-99 bonds - $3 per bond, up to 49 bonds - $3.50 per bond; $35 minimum commission for listed corporate bonds | Yes | Yes | None |
| Sogotrade |
| NA | NA | NA | None |
| TIAA |
| $50 + $2 per bond | Yes | Yes | None |
| TradeStation |
| $14.95 + $5 per bond | Yes | Yes |
Get $5 per trade stock and ETF commissions.
|
| TradingBlock |
| $1 per bond; $50 minimum | Yes | Yes | None |
| USAA |
| $25 + $3 per bond | Yes | NA | None
|
| Vanguard |
| $50 commission if a fee concession isn't available | Yes | Yes | None |
| Wellstrade |
| On a net yield basis | NA | NA | None |
* NA means Not Offered.
Best Municipal Bond Brokers
As you see from the table above not all discount online brokerage firms offer investing in U.S. Municipal and Corporate bonds in 2019. Among those
companies that do offer these investment products, the pricing varies significantly.
In 2019 we named Ally Invest The Best Brokerage for Municipal Bonds. Ally Invest is one of
the six largest discount online brokers in the U.S. The firm charges just $1 per bond, with minimum of $10 per trade, and maximum of $250. The price
is valid for Agency bonds, Corporate bonds, Municipal bonds, Brokered CDs, Pass-thrus, CMOs, Asset Backed Securities.
Ally Invest has good educational materials on its website for investors interested in trading bonds. These include several articles on buying and selling
fixed-income products. One article covers several topics, for example, including how to understand bond prices and the advantages of a bond ladder.
At Ally Invest clients can choose from thousands bonds - one of the largest selections of bonds available online. The company offers great bond trading
and research platform with graphical charts to help you find bonds that match your criteria. Read detailed
Note: in the table above we listed Corporate and Municipal bonds data for the following discount online brokers: TD Ameritrade, Charles Schwab, Etrade, Fidelity Investments, Merrill Lynch/Edge,
Just2trade, Ally Invest, TIAA CREF, Muriel Siebert, Wellstrade/Wells Fargo,
Interactive Brokers, Firstrade, Capital One Investing, TradeStation, USAA Brokerage, Cobra Trading, Kapitall and TradingBlock.
Why Corporate and Municipal Bonds Should Be Considered for Any Portfolio
If you're building an investment portfolio, you may be focused on stocks, ETF's, and mutual funds. These securities get the lion's share of attention in the financial world. But any diversified portfolio will also include bonds, particularly corporate and municipal debt.
Advantages of Corporate Bonds
When large multi-billion dollar companies sell debt, creditors (the people who buy the bonds) get the financial strength of the corporations to back up the securities. The bonds are as strong as the companies behind them, and often, this is pretty strong. Some of the world's blue-chip companies, for example, have better financial records than those of shaky governments.
Just look at Argentina, Russia, and Greece. These governments have either already defaulted on debt in recent years or are close to it. Now compare them to Microsoft, Johnson & Johnson, and the Royal Bank of Canada. They all have AAA bond ratings, the highest possible credit rating. Their financial strength surpasses that of many governments around the world, making their bonds safer than some government debt.
Accepting a slightly lower credit rating, say A+, which is still investment grade, will result in a higher interest rate. The difference can be half a percentage point or more in some cases. The companies that issue this quality of debt are still very sound. Corporations include Pepsico, Shell, and US Bancorp.
And of course, there are the non-investment grade bonds, also known as junk bonds, which provide the highest coupon payments, but with the highest risk. No matter what quality of debt you purchase, remember that the periodic interest payments and the one principal payment at the end are what make the investment worthwhile.
Advantages of Municipal Bonds
The principal and interest payments of corporate bonds are taxable, which is why municipal bonds are popular by high-net worth individuals. Because these taxpayers are in high tax brackets, tax-exempt investments become very important.
Interest payments by most municipal bonds issued by U.S. local governments are exempt from the federal government's taxing authority. Note that this does not include capital gains on principal payments, nor does it include the tax status of municipal debt at the state level. Many municipal bonds do have tax advantages at the state level, however.
Let's say you have ten municipal bonds each with a face value of $1,000. The total interest payments received in a calendar year is $280. This income is federally tax free, and assuming no taxes are required at the state or local level, there is nothing owed on the income. Taxpayers who are in the 39.6% federal tax bracket would save $110.88 in tax.
There are two types of muni bonds: revenue and general obligation. General obligation bonds are backed by the full faith and credit of the issuing authority. Revenue bonds are only backed by a particular project, like a toll-way.
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