Corporate Bonds: Everything you need to know

Corporate bonds are a major source of capital for many businesses along with equity and bank loans/lines of credit. They can be quite secure or sometimes risky

Now that municipal bonds have been covered, let’s get to corporate bonds. Here you’ll learn about what corporate bonds are, how they work and how to buy them.

What are corporate bonds?

Corporate bonds are considered higher risk than government bonds. They’re a debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company. This typically means money to be earned from future operations.

The company’s physical assets can sometimes be used as collateral for bonds. Because these bonds are higher risk, interest rates will be higher – even for top-flight credit quality companies.

How do corporate bonds work?

Corporate bonds are issued in blocks of $1,000 in par value, and almost all have a standard coupon payment structure. They may also have call provisions to allow for early prepayment if prevailing rates change. Corporate bonds are a major source of capital for many.

A company needs to have some consistent earnings potential to be able to offer debt securities to the public at a favorable coupon rate. The higher a company’s perceived credit quality, the easier it becomes to issue debt at low rates and issue higher amounts of debt.

Corporate bonds are fully taxable at the federal, state and local levels – a chief difference between this kind of bond and municipal bonds or treasury bonds. Most of them are taxable with terms of more than one year. This is another reason corporates usually generate higher interest payments than these potentially tax-exempt bonds.

Corporate debt that matures in less than one year is typically called “commercial paper”.

These bonds can be quite secure or sometimes risky. Their inherent value is greatly determined by the credit worthiness of the corporation offering the bonds. Be aware that corporate stability can change over time. For example, until 2009, most bonds offered by U.S. automakers implied good levels of security. However, the bankruptcies of GM and Chrysler, combined with serious financial problems at Ford (F), generated much higher risk factors for their corporate bonds. Typically, however, corporate bonds are more secure than corporate stocks.

To buy corporate bonds

Corporate bonds trade in dealer-based, over-the-counter markets. In over-the-counter (OTC) trading, dealers act as intermediaries between buyers and sellers. Corporate bonds are sometimes listed on exchanges (these are called “listed” bonds) and electronic communication networks. However, vast majority of trading volume happens over-the-counter.

Corporate bonds can be bought through a full-service or discount broker, a commercial bank or other financial intermediaries. The best time to buy a corporate bond is when interest rates are relatively high.


The Best Stock Newsletters as of June 29, 2025

Ranking of Top Stock Newsletters Based on Last 3 Years of Stock Picks

We are paid subscribers to dozens of stock newsletters. We actively track every recommendation from all of these services, calculate performance, and share the results of the top performing stock newsletters whose subscriptions fees are under $500. The main metric to look for is "Excess Return" which is their return above that of the S&P500. So, based on last 3 years ending June 29, 2025:

RankStock NewsletterStock
Picks
Average
Return
Excess
Return
Percent
Profitable
Max %
Return
1.Seeking Alpha logo
Alpha Picks
7663%40%73%969%
Summary: 2 picks/month based on Seeking Alpha's Quant Rating; Retail Price is $499/yr. See details in our Alpha Picks Review.July, 2025 Promotion:
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2.Moby logo tiny
Moby.co
30843.3%12.3%74%1764%
Summary: 60-150 stock picks per year, segmented by industry; Retail Price is $199/yr. Read our Moby Review.July, 2025 Promotion:Next pick free!
3.Motley Fool logo
Stock Advisor
7241.2%6.9%78%258%
Summary: 2 picks/month and 2 Best Buy Stocks lists focusing on high growth potential stocks over 5 years; Retail Price is $199/yr.
Read our Motley Fool Review.
July, 2025 Promotion: Get $100 Off
4.Zacks logo
Value Investor
3917.5%6.1%38%410%
Summary: 10-25 stock picks per year based on Zacks' Quant Rating; Retail Price is $495/yr. Read our Zacks Review.July, 2025 PROMOTION:$1, then $495/yr
5.Motley Fool logo
Rule Breakers
6640.0%4.7%61%311%
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6.TipRanks logo
TipRanks SmartInvestor
12110.6%3.7%55%340%
Summary: About 1 pick/week focusing on short term trades; Lifetime average return of 355% vs S&P500's 149% since 2015. Retail Price is $379/yr. Read our TipRanks Review.Current Promotion: Save $180
7.TheStreet logo
Action Alerts Plus
39420.0%3.4%57%220%
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8.Motley Fool logo
Stock Advisor Canada
3632.3%0.5%69%378%
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Top Ranking Stock Newsletters based on their last 3 years of stock picks' performance through May 31, 2025 as compared to S&P500. S&P500's return is based on average return of S&P500 from date each stock pick is released. NOTE: To get these results you must buy equal dollar amounts of each pick on the date the stock pick is released. Investor Business Daily Top 50 based on performance of FFTY ETF.
Build your wealth faster with best stock picks: See our new June 29, 2025 ranking of the Best Stock Newsletters.

The Best U.S. Brokerages as of June 30, 2025

Ranking of Top U.S. Stock Brokerages Based on Fees, Features, and Sign-Up Bonuses

We are experienced users of dozens of stock trading platforms. We stay up to date on these platforms' service offerings, subscription fees, trade commissions, and welcome bonuses. The brokerages listed below are for U.S.-based investors, and are ranked in order of overall value received after taking advantage of their sign-up and/or referral offers.

Rank Brokerage Fees Features Sign-Up Bonus Read Our Review
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✅ Access to U.S. and Hong Kong markets
✅ Educational tools
60 free stocks with $5k deposit; or 25 free stocks with $2k deposit Moomoo Review
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✅ IBKR Lite & Pro tiers for all
✅ SmartRouting™ and deep analytics
Refer a Friend and Get $200 Interactive Brokers Review
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✅ 3% IRA match
✅ Level II data
✅ No interest on first $1,000 of margin
 Save with Annual Fee Robinhood Gold Review
5. M1 Finance

$3 monthly

10k in assets

✅ Automated investing “Pies”
✅ Banking & low-interest loans
✅ No trading fees with scheduled trades
$75-$500 Tiered Sign-up bonus M1 Finance Review
6. Webull $0 ✅ Extended-hours trading
✅ Great charts and screeners
✅ Commission-free options trading
$10 and a 30-day complimentary subscription to Webull premium;
$200-$30,0000 Tiered Sign up bonus
Webull Review
7. Public $0 ✅ Fractional shares
✅ No payment for order flow model
✅ “Alpha” tool with earnings calls
$100-$10,000 Tiered Cash Account Transfer Bonus Public Review
8. Composer $32 a month ✅ Invest in automated strategies
✅ Build custom strategies easily
✅ IRAs
$49 per successful referral with no limit on the number of referrals Composer Review
9. Stash

Growth $3;

+ $9 Month

✅ Stock-Back® debit card rewards in fractional shares
✅ Auto-invest and budgeting tools
✅ Curated theme portfolios
$5 when you invest $5 Stash Review
10. Acorns

Bronze $3; Silver $6; Gold $12 a month

✅ Automated investing portfolios
✅ ESG curated portfolios
✅ Acorns Early Invest for Kids' Accounts
Get a $20 bonus when you start saving & investing Acorns Review
11. Etoro $0 ✅ CopyTrading™ to follow top traders
✅ Trade U.S. stocks, ETFs, and crypto
✅ Trades with themed portfolios
$10 Crypto Sign-Up Bonus Etoro Review
12. Cash App $0 ✅ U.S. stocks and bitcoin; $1 minimum
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Up to $200 in free overdraft coverage and earn 4% on cash Cash App Review
Fees, features, sign-up bonuses, and referral bonuses are accurate as of May 31, 2025. All information listed above is subject to change.