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Bond investors can be a nervous bunch. Many of them like the safety that bonds offer. However, one of the issues that has been nagging many bond investors has to do with yield. Yield isn’t that high right now. Bond yields may be higher than cash right now, but they are still fairly low. But, as many equity investors are quick to point out, when you take the relative safety of bonds, you are not going to see very high yields. Higher returns require higher risk. BusinessWeek makes this argument very well:

After all, reward is proportionate to the risk you take, making it infeasible for two different portfolios to carry the same amount of risk yet deliver substantially different levels of return. “It’s almost like gravity, you can’t get off it,” says Frank Armstrong, president of Investor Solutions in Coconut Grove, Fla. “Investors need to accept that we’re in a low-interest-rate environment. Anything beyond money-market funds is going to have some kind of risk they may or may not understand.”

However, there are ways to get higher yields on your bond portfolio. It does require adding a little risk, but many bond investors can handle the increase in risk — as long as it results in higher yields that are still reasonably safe.

Different types of bonds to add risk (and return) to your bond investments

Many bond investors go with short-term Treasuries. These are notes that range from a few months to 5 years. However, it is possible to increase your return by buying bonds for a longer term. Longer-term Treasuries, such as 8 year and 10 year notes, may provide better yield. But you still have to worry about the risk of rising rates at the tail end of the bond maturity.

Another option is to invest in municipal bonds. These are local government bonds that usually offer a higher return. However, these municipal bonds carry more risk, and can be volatile. But there are some that have tax advantages, and they can be helpful as part of a mutual fund.

Finally, consider corporate bonds. These are picking up, and you can get good yields as businesses try to find funding. But these are among the riskiest of bond choices right now, with so much in the business sector in turmoil.

You can also invest in bond indexes to get access to a wider variety of bonds.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.