Radical Guide to Online Bond Investing: Fidelity

Last summer, Fidelity launched its “open bond market,” with simplified, competitive and flat online pricing.  Fidelity said what it will charge the customer.  Its flat, disclosed fee varies according to bond type.  (Still, as always, other dealers may have put their spreads into the same trade). 

We are excited about Fidelity.  Suppose you purchase 10 municipal bonds, which is considered to be a small-lot, retail-sized trade. Other full-serviced brokers --- with little compunction --- may bury, at a minimum, a 1% spread of a point into that trade (1% of par).  Fidelity is handing you that bond at .30% of par, a third of the cost.  

Finally, Fidelity meets all the criteria laid out in 4 Things You Want to Trade Bonds Online and 2 Other Features You Should Want from Your Online Bond Broker.  As a full participating broker in BondDesk, Fidelity is tapping offerings from 50+ dealers in a reasonably competitive market for most bond products. 

One negative:  we dislike the “bond funds” emphasis on Fidelity’s bond center.  It emphasizes Fidelity’s primary marketing aim, which is to sell bond funds, and downplays self-directed bond investing.

That said, Fidelity took a leap forward.  In no small way, Fidelity set the bar for what competitive retail bond markets should look like.

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June 3, 2005 | Permalink


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