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Investing in bonds offers reasonably good returns with greater safety. Bonds are generally long term investment instruments popular with high-net-worth investors. Four basic types of bonds are available and they are sold through the Government, through corporations, state and local governments, and foreign governments.

The greatest attraction in bonds is very low risk or no risk and you are sure to get initial investment back. This makes bonds the perfect investment choice for new investors with low risk tolerance who can afford to invest for longer periods. Though you can invest in short term bonds, they may not offer attractive terms as long term bonds do.

Treasury Bonds are sold by The United States Government through the Treasury Department. You can purchase Treasury Bonds with maturity dates ranging from three months to thirty years.

Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and Treasury Bonds. All Treasury bonds are backed by the United States Government, and tax is only charged on the interest that the bonds earn.

Corporate bonds sell through public securities markets. A corporate bond means you are investing in the company debt. The company uses the money to pay off the debtors. Corporate bonds usually have high interest rates, but they are riskier . If the company goes bankrupt, the bond goes up in the air with very little to nill recovery value.

State and local Governments also offer bonds. Unlike federal government bonds, state and local government bonds have better interest rates. The reason being that State and Local Governments can go bankrupt – unlike the federal government.

State and Local Government bonds are free from income taxes – even on the interest. State and local taxes may also be waived. Tax-free Municipal Bonds are common State and Local Government Bonds.

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