Fast growth. Safe bets. Steady returns. Different investors have different priorities, but the universal key to success is diversification. When establishing your portfolio, consider one type of investment that can offer low-risk, consistent returns: bonds.

Companies and governments issue bonds to raise money. By purchasing the bond, the buyer (the bondholder) lends money to the issuer in exchange for the original value of the bond plus interest. There are three main types of bond issuers: government (the Treasury is one example), corporate (such as McDonald's), and municipal (such as your hometown). Simply put, a bond is an obligation to repay a certain amount of money with interest.

Bonds are generally a safe place to park cash because the investor earns a pre-determined amount of interest. If the issuer files for bankruptcy, bondholders are given priority over shareholders for repayment. Also, the interest on bonds is paid throughout the term of the bond, so you don't need to wait until the maturity date--when the issuer has to pay the amount borrowed--to earn interest.

There is always some risk that the issuer will default on the bond, which is why it's always important to research purchases before investing. To help investors, bonds are rated according to the creditworthiness of the issuer: the lower the rating, the higher the risk.

Bonds, when they're purchased straight from the issuer, are initially purchased at "par value"--the amount that's stated on the face of the certificate. Then they can be traded on the open market for par value, at a premium (more than their par value), or at a discount (less). No matter what they're sold for, whoever holds the bonds when they mature will receive the fixed interest rate determined at the time they were issued, and the payout will be calculated using the par value.

Most bonds and bond funds (a collection of different bonds) can be purchased through a broker. There are websites, like municipalbonds.com, where you can find out which cities are issuing bonds. U.S. government bonds can be purchased through a financial institution or online at treasurydirect.gov.

Sources: sifma.org, investopedia.com, finance.yahoo.com, moneycentral.msn.com, ffscambridge.com, bloomberg.com