How to Buy Government Bonds: Tips for New Investors

How to Buy Government Bonds

Government bonds are a smart way for new investors to begin their financial journey. These fixed-income assets are backed by the U.S. government and offer stability, predictable returns, and lower risk compared to many other investment options. It explains how government bonds work, their benefits, where to buy them, and what new investors need to get started.

Government Bonds in the United States

In the U.S., government bonds are issued to raise funds for public services such as infrastructure and national defense. These bonds are known for their safety because they are backed by the federal government. Investors can choose from a range of short- and long-term options based on their goals.

What Government Bonds Are Used For

Government bonds are fixed-income assets issued to fund public expenditures. When you invest in a bond, you lend money to the government in exchange for regular interest payments and the return of your principal at maturity. These investments are considered low-risk and are often used to balance a diversified portfolio.

Types of U.S. Government Bonds

There are several categories of government bonds, each with unique benefits:

• Treasury Securities: Includes Treasury bills (short-term), notes (medium-term), and bonds (long-term), all with guaranteed interest payments.
• Municipal Bonds: Issued by local governments, often offering tax-exempt interest at the federal and sometimes state level.
• Savings Bonds: Such as Series EE bonds, which are easy to buy and ideal for long-term saving goals.

Reasons to Invest in Government Bonds

Government bonds are a favored investment for people seeking safety and consistency.

Benefits include:

• Lower risk of default compared to corporate bonds.
• Predictable payment schedules and maturity dates.
• Potential tax advantages, particularly with municipal and savings bonds.

Stability and Income Reliability

Treasury securities are highly reliable due to government backing. They offer predictable income through fixed interest payments and return the original investment at maturity. This makes them ideal for retirement planning and budgeting.

Liquidity and Tax Considerations

U.S. Treasury bonds are widely traded, providing liquidity for investors. Interest is federally taxable but exempt from state and local taxes. Municipal bonds may offer additional tax benefits, especially for high-income investors.

Getting Started with Bond Investing

New investors should first choose a platform and understand basic requirements:

• Create an Account: Use TreasuryDirect or a brokerage firm.
• Fund the Account: Transfer money electronically.
• Verify Your Identity: A Social Security number is required to buy bonds.

Account Types and Access Options:

• TreasuryDirect: Government-run, low entry point, and easy for beginners to access Treasury bonds directly.
• Brokerage Accounts: Available at firms like Vanguard or Schwab, these accounts offer access to a broader range of bonds and additional support.

Where to Buy Government Bonds

Investors can purchase government bonds from:

• TreasuryDirect: Direct from the government with no fees.
• Brokers: Access to primary and secondary markets with greater variety.
• Banks: Some still offer paper savings bonds or allow participation in auctions.

Buying Process

Follow this three-step method to invest in bonds:

Research and Select a Bond

Choose a bond that aligns with your goals. Short-term bills suit savings goals, while long-term bonds or TIPS can protect against inflation. Review maturity terms, interest rates, and inflation risk.

Open and Fund an Account

Set up a TreasuryDirect or brokerage account and link a funding source. Ensure your account type matches your risk comfort and investment needs.

Place an Order and Complete the Transaction

Select a noncompetitive bid to accept the yield offered, or a competitive bid to set your desired yield. Treasury auctions occur regularly, and brokerages allow access to ongoing market opportunities. After the purchase, you’ll receive interest according to the bond’s schedule.

Final Thoughts

New investors can grow their savings in a safe, steady way by buying government bonds. There are many kinds of them, and you can easily find one that works for you on sites like TreasuryDirect or through a broker. These investments can help you balance your portfolio, give you steady income, and protect your principal, all while keeping things simple.

Frequently Asked Questions

Can I lose money by investing in government bonds?

Government bonds are considered very safe, and defaults are rare. However, if you sell before maturity during a time of rising interest rates, you might receive less than you paid. Holding the bond to maturity ensures you recover your full principal.

How are government bonds taxed in the U.S.?

Interest from treasury securities is taxed at the federal level but not at the state or local level. Municipal bonds may offer further tax advantages. For savings and local bonds, tax rules vary, so it’s wise to consult a tax advisor.

Is it better to buy bonds yourself or use a broker?

Buying directly through treasurydirect avoids third-party fees but limits your options. Brokers offer more investment choices and access to secondary markets. Choose based on whether you prefer simplicity or more variety and flexibility.

What is the minimum investment for u.S. Government bonds?

You can start with just $100 through treasurydirect. Paper bonds may require more and have annual purchase limits, but the low threshold still makes them accessible for most investors.

Written by Kevin Lee Updated September 9, 2025 by Albert Fang