Best Brokerage Firm for Bonds
December 18, 2006 by TFB[Last updated on April 3, 2008.]
This is a part of the TFB Awards for Best In Class in Financial Services series.
Fidelity Investments wins the TFB Award for Best Brokerage Firm for Bonds .
Although the TFB Award for Best Mutual Fund Company went to The Vanguard Group , I don’t like Vanguard’s brokerage service as much. I use a brokerage account for buying T-Bills, TIPS , and Agency/GSE bonds . For this purpose, Fidelity has the best service at the lowest cost ($0).
- Account maintenance fee: Fidelity free; Vanguard $30, free only if you have other Vanguard assets > $100,000.
- Commission for Treasury auction order placed online: Fidelity free; Vanguard $10, free only if you have other Vanguard assets > $100,000.
- Commission for Treasury secondary market order placed online: Fidelity free; Vanguard minimum $40.
- Minimum Treasury auction order size: Fidelity 1 bond = $1,000; Vanguard $10 bonds = $10,000.
- Customer Service hours: Fidelity 24×7x365; Vanguard 8 a.m. - 8 p.m. Eastern Time on weekdays only.
- Hours for taking orders online: Fidelity 24×7x365; Vanguard 8 a.m. - 8 p.m. Eastern Time on weekdays only.
If you only buy Treasury bills, notes (including TIPS) at auction or on the secondary market, or new issue Agency/GSE bonds, you can use Fidelity completely free of charge. Vanguard becomes free only when you have over $100,000 in Vanguard funds and Vanguard ETFs with them. The limitation on when you can place an online order is probably the most ridiculous service limitation by Vanguard. If you want to place a bond order online with Vanguard Brokerage Service, you must do it on weekdays between 8 a.m. and 8 p.m. Eastern Time. Outside of those hours, Vanguard’s online bond order taking system goes offline. Don’t ask me why.
Many cheap brokerage firms give very low interest rate on your cash when you are in between investments. Not at Fidelity. The yield on its money market funds are not necessary the highest but high enough to place them in top 10 in the country. When one Treasury bill matures but you are waiting for the next auction, your money still earns a good enough yield. You don’t have to worry about transferring back and forth between TreasuryDirect and your bank account.
Fidelity’s customer service is also first rate. My e-mails to them were all replied by a rep within 24 hours, even on weekends. When I asked them for copies of statements from two years ago on a closed account, I received them within a few days. They didn’t charge me anything.
If you are going to open an account with Fidelity, they have a few promotions. Be sure to register for these first. They do stack, i.e. you can get $100 bonus plus either United or American miles.
- $100 bonus [update: no longer offered]
- up to 25,000 United miles OR up to 25,000 American miles
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