Municipal bonds(also known as "municipals") are attractive to many investors because the interest income is exempt from federal income tax and in many cases, state and local taxes as well. Municipals can be issued by states or local governments and backed by their taxing authority, these are called general obligations. In addition, municipals often represent investments in state and local government projects that have an impact on our daily lives, including schools, highways, hospitals, housing, sewer systems and other important public projects. These municipals are known as revenue bonds.

Municipal bonds are mostly considered a safer fixed income investment. However, an investor must be very cautious when selecting municipals because there may be inherent risks of default by local governments or taxing authorities. Investors can also look for municipals that are issued with insurance protection backed by third party insurers. Moody's and Standard and Poor's will rate municipals based on their financial security and will give their highest Aaa/AAA rating to insured municipals.

With over $2 trillion in outstanding municipal bond debt, many investors with a need for tax-exempt income look to municipals to meet their financial planning goals. This section covers the ins and outs of municipal bond investing, such as: the AAA rating, tax issues and various structures.