The U.S. federal government issues its own bonds from the treasury and from several government companies. Those maturing in less than one year are known as T-bills. Bonds that grow in one to ten years are T-notes, and those that take more than ten years to mature are treasury bonds. Sometimes, you do not have to pay state or local earnings taxes on the interest they make.

Munis finance things like healthcare facilities, schools, power plants, streets, office structures, airports, bridges and so forth. Towns typically provide bonds when they require more cash than they gather through taxes. The advantage about community bonds is that you don't need to pay federal earnings taxes on the interest they earn.

While corporate bonds are a greater threat than federal government bonds, they can make a lot more cash. There's also a much bigger selection of corporate bonds. The downside is that you do have to pay federal income tax on the interest

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