Investment-grade corporate bonds, for example, were paying investors around 21/2 percentage points more than Treasuries in early August. The best way to get into corporates is through a diversified intermediate-term core bond fund, says Morningstar's Lawrence Jones. Harbor Bond, a Money 70 fund led by Pimco's Bill Gross, has a competitive expense ratio of 0.56% vs. 0.97% for the category.
Municipal bonds look like a deal too. Their yields are usually four-fifths those of a similar Treasury bond because the income they throw off is free of federal (and maybe state) income taxes; today munis and Treasuries pay almost the same. Vanguard Intermediate-Term Tax- Exempt fund is the best pick here.
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