Some investment portfolios benefit from diversification and balance when economic conditions turn unfavorable. The type of asset also comes into play. Equities return high yields but experience volatility, while bonds return lower yields but see more stability. Therefore, bonds can balance portfolios. When investing in bonds, there are a few things to consider.

Investors exploring bonds as an investment vehicle can consider the issuer’s credit standing. Governments and corporations issue municipal and corporate bonds with varying par values and coupon rates. Each issue will receive a rating by a credit rating agency.

Then, look at the maturity period, potential returns, and accompanying risks. Bonds may mature in a year or 30, especially in the case of United States Treasury Bonds. Treasury Bonds have low default rates and extended maturity dates. However, bonds with high returns have higher risks. Municipal bonds, corporate bonds, and government agency securities pose a reduced risk for investors.

Lastly, explore the prevailing interest rates and potential tax benefits. Novel bonds incur higher interest rates. The tax benefits vary, but federal and state taxation does not affect the income earned from certain bonds.