?Companies and governments issue bonds to fund their day to day operations or to finance specific projects. When you buy a bond, you are loaning money for a certain period of time to the issuer. In return, you get back the loan amount plus interest. Bond prices move in opposite direction of interest rates.Important bond elements include:Issuer, Interest rate (coupon rate), Call feature, Maturity date (short term <1 year), Face value, and Rating (repayment capability).There are many different types of bonds:Bond TypeFeaturesSavingsNon-marketable security issued by US Treasury in small denominations for individual investors. Series EE and HH bonds. Low risk, low interest rate of returnTreasuriesDirect obligations of the US Government. Includes treasury bills, notes and bonds. Interest income and Federal tax only.MunicipalDebt issued by a state or local government. Interest income received is free from federal tax and is generally exempt from state and local ta fiat currency x if you reside in the state the bond was issued.CorporateDebt issued by a corporation that pays interest semi-annually at a fixed rate and matures on a specific date.Zero couponProvides no periodic interest payments. Bonds issued at fraction of face value and become worth their face value at maturity.Junk (High yield)High risk, high interest paying bond with a low bond rating due to the poor financial condition of issuing company. I don’t recommend these.Bonds have seen record buying in the past year or so from panicked investors. However, some investors like Warren Buffett are now saying that bonds are overvalued, expensive, and ready to “burst” much like the stock market did.http://finance.fortune.cnn.com/2010/10/05/buffett-hints-at-bond-bubble/?section=money_topstoriesHowever, bonds do provide income and stability. As part of a diversified portfolio, you should own both stock and bond funds. That way, if the economy heats up and stocks jump in value, great.