In today’s market, safety isn’t as easy to come by as it once was – unless you’re talking about an FDIC insured money market account or certificate of deposit. But if you want better-than-average returns, investing in a money market account or CD probably isn’t the best option. When I want a decent amount of safety with a worthwhile yield, I often look to bonds.

I like to think of bonds as elaborate IUOs. You lend money to a company or a government for a specific amount of time, and they use your money for daily operations. In return – at the time of maturity – they pay back your principal plus interest. Bonds pay interest on a regular basis, so they work well as fixed-income investments.

Safe and sound

Government savings bonds are considered some of the safest investments available because they are backed by the credit of the U.S. government.  Corporate bonds are dependent on the stability of the corporation, which means they inherently carry a bit more risk. But corporate bonds do carry a higher yield than government bonds, making them a little more enticing to some investors.

Mix and match

Stocks often return more than bonds, but they are much more volatile. Having a combination of stocks and bonds in your portfolio can provide stability – if your stocks drop, your bonds are still earning interest. The income you gain from your bonds can offset losses from your stocks.

Tax benefits

U.S. savings bonds provide tax benefits. You won’t pay state or local taxes on the interest you receive from the bonds, and federal taxes can be deferred until the bond matures. Again, these bonds won’t pay as much as corporate bonds, but the tax paybacks might be worth the hit in yield.

When you’re investing in bonds, look at the total return and not just the yield. Keep in mind that the interest payments will stay the same, but the price of the bond will fluctuate each day.