How are bonds taxed?

Inside tax-sheltered retirement accounts such as IRAs and 401(k)s, they're not taxed, just as stocks aren't - until you withdraw the money, that is (assuming you have a traditional plan, rather than a Roth).

Outside tax-sheltered accounts, the interest is taxed as regular income - at rates as high as 35%.

A note on Treasury Inflation Protected Securities (TIPS): You'll be taxed on the inflation adjustment to your TIPS' principal even though you don't reap that gain until the TIPS mature or you sell them.

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.