When you buy bonds through TreasuryDirect (TD), the interest rate isn't known at the time of purchase, which can be a bit inconvenient compared to buying through a brokerage. On the other hand, with brokerage secondary markets, you typically know the rate upfront, and these rates may even be higher than what TD offers. Additionally, bonds purchased through brokers can be sold before maturity, which offers more flexibility.
However, there are a few potential downsides to buying bonds through a brokerage:
- Fees/Commissions: Brokerages may charge fees or commissions for purchasing and selling bonds, which can reduce the overall return on your investment.
- Market Fluctuations: In the secondary market, bond prices can fluctuate based on interest rates and market conditions, so if you need to sell before maturity, you might not get back the full value you paid.
- Access to Specific Bonds: Some bonds available through TD (such as certain Treasury bonds) may not be available on the secondary market.
Despite these factors, some people still prefer TreasuryDirect because it has no fees or commissions, and the bonds are backed by the U.S. government with more predictable, stable terms. For those who prioritize simplicity, long-term holding, and avoiding fees, TD might still be the better option.
