|As I posted before, the key is being diversified in any investment, including bonds. If you have enough $$, you can do individual bonds, otherwise, stick to pools or funds or trusts. I've done well over the years, kind of doing the opposite of what the experts say. It's contrarian theory.|
For example, when a child was born, I put $10,000 in a trust for college. At the time, interest rates were very high and I was able to score about .155. When the child was 10, the account was worth about $45,000.
Bonds have less risk than stocks, but the risks are different. People tend to think of them as "safe" so the perception of risk vs reality of risk may actually be higher. Most invest in stocks and think there is risk.
With bonds, you have interest rate risk, you have underlying issuer risk, you have inflation and deflation risk/reward, as well as overall macro-economic risk. The recent problems created some new risks where otherwise fairly safe investments became non-trading for a period of time.
Finally, the tax advantages of municipal bonds may give you a better result. General obligation bonds are backed by the state. I try to stick with them. As we've seen, brokers would often sell revenue bonds with the phoney AAA ratings from the rating agencies. So far, munis have done well though.
STay away from the complicated stuff. Brokers like these as the commissions are often high. Collateralized mortgage obligation and bonds based on revenue stream strips, etc.