Long-term Treasury bonds are a classic income play. They offer scant default risk and excellent liquidity. Yields, currently around 2%, are respectable in today's environment, and the interest is exempt from state and local income tax.

Those aren't the only reasons to hold them, though. "Treasury bonds historically have done well as safe haven assets during times of chaos," says Janet Briaud, chief investment officer and managing partner at fee-only firm Briaud Financial Advisors in College Station, Texas. "That is another compelling reason to have some in a portfolio." Indeed, when stocks collapsed in 2008, Morningstar's long government bond category returned almost 28%.

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