(Business 2.0) – As financial instruments that steadily throw off cash, corporate bonds are a no-brainer. But until a few years ago, they were a tricky proposition for the average investor. Bond mutual funds charge up-front and ongoing fees that put a serious dent in your returns, and your payouts vary as the fund manager buys and sells bonds. Buying corporate bonds on the open market is even more complicated. Prices shift from minute to minute, and brokers often take a hefty, disguised markup by cutting into your interest rates. With most bonds, it's hard to know exactly what you're paying.

But that has changed, thanks to a simplified and more affordable type of bond called the retail note. Offered primarily by Merrill Lynch, ABN Amro's LaSalle investment banking division, and Chicago boutique firm Incapital, retail notes are priced at $1,000 apiece, with some "baby bonds" available for $25. The interest rates, set every Monday, stay put for a week. The bonds are now issued by 25 blue-chip companies ranging from Bank of America to Ford to GE, and the value of the notes they've issued has doubled to $150 billion in the past three years. As with any bond, of course, there's always the chance that an issuer will default, but with retail notes it's easier to buy several to spread out your risk. Incapital CEO Tom Ricketts suggests "laddering" your notes with different maturity dates, so if interest rates rise, you can roll the principal from your shorter-term bonds into new bonds at higher rates. Until then, you can just worry about earning interest. -- O.T.