A bond's maturity refers to the specific future date on which the investor's principal is expected to be repaid. Bond maturities generally range from one day up to 30 years. Choice of maturity will depend on when you want or need the principal repaid and the kind of investment return you are seeking within your risk tolerance. Generally, the longer the maturity, the greater the return.

Virtually all investments have some degree of risk that some or all of investment might be lost. When investing in bonds, it's important to remember that an investment's return is linked to its credit as well as market changes. The higher the return, the higher the risk.

Safe investments offer lower returns. Bond choices range from the highest credit quality (U.S. Treasury) securities to bonds that are below investment grade and considered speculative. In estimating risk tolerance, one should also be aware that if selling a bond before it matures, one will receive the prevailing market price, which may be more or less than its original price. The value of bonds fluctuates with the market, varying in the opposite direction of movement in interest rates.

There is no state or local income tax on the interest from U.S. Treasury bonds. There is no federal income tax on the interest from most municipal bonds, and in many cases no state or local income tax, either. So not all types of bonds offer special tax advantages.

There are several ways to invest in bonds: individual bonds, bond funds or unit investment trusts. The choice will depend on the amount of money to invest in order to achieve diversification, the degree to which professional management of portfolio is required and investor's willingness to pay for professional selection and portfolio management (like in bond funds). Generally, investing in individual bonds is best for preserving capital; while bond funds offer convenience and diversification even at minimum investment levels.