The reason why these types of bonds are so popular with investors who have high incomes is because of their extremely favourable tax implications – they are exempt from federal taxes and in most cases state taxes too.

A word on the security attributes of a municipal bond fund – although they are backed by the government and are considered low risk rating, municipalities have in the past declared bankruptcy and avoided payouts altogether. So although they are generally low risk, investors should be aware that there are ways that you could lose out should something inadvertently go wrong.