Before deciding to add bonds to your portfolio you need to understand them a bit. Different bonds carry varying levels of risks. You need to understand which bonds are considered safer than others and why.

You must look at par value, the coupon rate and the date of maturity when weighing your choices.

A bond's par value basically tells you what your bond's value will be on the date of maturity. On the date of maturity, you will get your initial investment back.

You will know the date that this will happen ahead of time. This is referred to as the maturity date. In addition, on this day, you will also get paid the interest that was made on your investment.

Corporate and State and Local Government bonds can be 'called' before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the interest that it has earned thus far. Bonds that are offered by the federal government must remain until the expiration date.'

The coupon rate is the interest that you will receive when the bond reaches maturity. This is stated as a percentage. There is other information that you will need to discover what the interest rate will be. So if you had a bond with a par value of $3000, with a coupon rate of 5%, you would receive $150 for each year until the bond matures.

Because bonds are not issued by banks, many people don't understand how to go about buying one. You basically have two ways to buy one.

You can use a broker or brokerage firm to make the purchase for you or you can go directly to the Government. You can go through a brokerage house or you can go straight to the government. To get the best value for your bond with the least commissions compare rates between brokerage firms.

Buying your bonds from the government is actually quiet easy. If you want to purchase bonds, hold them all in one account and gain access to them easily consider Treasury Direct. This will save you money that you would otherwise have spend in brokerage firm fees.