Excellent point. I recall the CA municipality filing for bankruptcy several months ago, and that has certainly stayed with me because I’m still doing research to avoid such a loss.

I’ll probably go with a Vanguard fund (VWAHX) because it’s so well diversified. I’ve been searching for a safety net for my cash reserves, so this might be it. I like a few of the Muni bond ETFs as well, but I VWAHX admiral shares have a very low expense ratio.

Matt – taxes aren’t the only thing to think about regarding munis. While rare in the past, municipalities have been known to go bankrupt and Vallejo California did recently. Down here in the Dirty South, Jefferson County in Alabama came close (I’m not sure if they did) after losing a ton of money on interest rate swaps sold by J.P. Morgan. Who knows how many other jurisdictions got suckered into derivatives? I would do plenty of due diligence before getting into munis.

As for taxes, I anticipate the amount of tax conscious investing to reach astronomical popularity in the next few years. Muni bonds, or more specifically, muni bond ETFs will be very popular in the next few weeks.

I always have to correct people when they think McCain is going to ride into office and make sure no woman anywhere has another abortion. He doesn’t have the power (by himself) to overturn the Supreme Court. Can he eventually? Maybe but very unlikely.