Moreover, while purchasing individual bonds from one’s home state provides additional tax breaks, an investor may be overexposed to their state, especially the bond is based off the economy that supports his or her job and home, Roth added.

With muni ETFs, investors can also spread out risk with various state exposure. The three muni ETFs are market-cap weighted, so the states with the largest outstanding debt have the biggest weights, which include California, New York and Texas, respectively.

Additionally, some analysts and advisors suggest sticking to short- or intermediate-term funds since long-term bond funds are more susceptible to interest rate risks. MUB has a 6.34 year duration, ITM has a 6.92 year duration and TFI has a 7.14 year duration. There are also a number of short-term municipal bond ETFs available, including the SPDR Nuveen Barclays Short Term Municipal Bond ETF (NYSEArca: SHM), which has a 2.89 year duration, Market Vectors-Short Municipal ETF (NYSEArca: SMB), which has a 3.1 year duration, and iShares Short Term National AMT-Free Muni Bond ETF (NYSEArca: SUB), which has a 2.06 year duration. [Short-Duration Bond ETFs to Mitigate Potential Volatility]

The Vanguard Group is also planning its first foray into the muni bond ETF space with the Vanguard Tax-Exempt Bond Index Fund, which will track the S&P National AMT-Free Municipal Bond Index. [Excitement Builds Around Vanguard’s Muni ETF Foray]

For more information on the munis market, visit our municipal bonds category.

Max Chen contributed to this article.