iShares S&P National AMT-Free Municipal Bond Fund
Pros: Munis, which are issued by local governments to raise money, tend to be less risky than corporate bonds; U.S. municipal debt also tends to be safer than emerging-market issues. Municipal bonds’ tax-free status can be a benefit as well. MUB has a three-year average return of 5.6%.
Cons: Munis might be safer, but they are not default-proof, as the recent news out of Detroit proves. MUB’s performance this month is its worst since September 2008.
Verdict: MUB’s pain might be investors’ gain; the selloff has dumped shares of the fund into the bargain basement. And savvy investors appear to have found the muni market’s bottom — MUB was up over 2% by midday Wednesday.