IN THIS SECTION, we describe what may seem like a dizzying array of bond choices. It is your guide through the maze so that you can increase your wealth. We want your money to work as hard as you do, to put in overtime chugging out interest while you sleep. We want you to rest easy, knowing that you have invested wisely and that your funds will be there to take care of you and the people you love.

The United states has the largest debt market in the world, with more than $8 trillion in outstanding government debt alone. through the credit markets, loans are sold in the form of treasury debt and inflation-protected securities, while government agencies package housing loans into bite-size securities. the agencies add liquidity to those markets and finance themselves as well by selling bonds. Those bonds can also add liquidity to your portfolio.

The federal government sells EE and I savings bonds directly to you. You can purchase these bonds over the Internet and through bank branches in small denominations. They're accessible to every person, enabling even those with small sums of money to put their dollars to work earning interest. These bonds are complex, however, and we show how you can use them to your advantage.

Subsidized by anticipated federal revenue or using solely their own sources, municipalities sell bonds to finance sewers, transportation, health care, education, energy, economic development, and other projects. This borrowing ability of state and local governments enables them to build an infrastructure so that businesses and individuals may grow and prosper. Most of these bonds are superb investments, although some can be hazardous to your financial health. You'll understand why when you read chapter 10.

Corporations sell bonds to provide liquidity for the development of new ideas and projects and for refurbishing the old ones. Banks, brokerage firms, airlines, chemical companies, retail clothing chains, computer companies—you name it—access the credit markets to build factories and offices and to explore new markets. Corporations also borrow using medium-term notes and convertible bonds. In chapter 11, we describe how these bonds may start out as high-yield bonds or be transformed along the way.

Finally, there are bond look-alikes that use banks, brokers, and insurance companies to tap your funds for income-producing investments. Included in this category are the ubiquitous CDs issued by banks; preferred stock sold by corporations; fixed- immediate and deferred annuities sold by insurance companies; and stock dividends, sometimes a by-product of stock ownership. We warn you of some of the pitfalls associated with these financial instruments and highlight their usefulness.

For the sake of clarity, we used the same format to describe all the bonds in this part of the book. For each one, you'll find information on its advantages, risks, and tax implications as well as on any special features. This format should make it easy for you to compare one bond with another and to see which ones will best suit your needs and enrich your portfolio.