In general, bonds can be a good choice in both tax-deferred and taxable accounts, depending on the type of bond investment. Income from a bond fund may fluctuate, but coupon payments from individual bonds are generally fixed, which can provide a stable income stream.

Also, while the interest income on most bonds is taxable, some bonds are considered to be tax-exempt. With tax-exempt bonds, you don't pay federal income tax on the interest you earn from the bond. The interest income on many tax-exempt bonds is exempt from state and local taxes as well. Tax-exempt bonds may be a good investment choice in your taxable account. And the higher your tax bracket, the more advantageous a tax-exempt bond investment can be.

Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less the original cost. Bond funds are subject to increased loss of principal during periods of rising interest rates.