Investors can buy all three types, without paying commission, directly from a Federal Reserve Bank, or from a dealer. An important feature of these bonds is that the interest which a bondholder receives is not subject to federal income tax. Also the interest is exempt from state and local tax if the bondholder lives in the jurisdiction of the issuer. Corporate Bonds usually pay higher interest than government bonds but they are somewhat riskier. If a corporation goes bankrupt, bondholders, as creditors, are paid their money before stockholders.
Corporate bonds are either secured or unsecured.
A secured bond is backed by specified assets or collateral, while an unsecured bond is backed only by the faith and credit of the corporation. To sell your bond you have to discount its price. The default rate is much higher on junk bonds than on higher quality bonds. As already discussed, when you buy stock, you are becoming an owner of the company. If the company does well, the value of your stock should go up over time.