The U.S. government releases its own bonds from the treasury and from numerous federal government firms. Those growing 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 income taxes on the interest they earn.

Munis finance things like health centers, schools, power plants, streets, office structures, airports, bridges and so on. Towns usually provide bonds when they need more cash than they collect through taxes. The good idea about municipal bonds is that you do not have to pay federal earnings taxes on the interest they make.

While corporate bonds are a higher threat than federal government bonds, they can make a lot more money. There's also a much larger choice of corporate bonds. The disadvantage is that you do have to pay federal income tax on the interest they make.

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