Muni Bond Funds That Work for You

(VWITX Quote)Vanguard's Intermediate-Term Tax-Exempt (VWITX) fund has lower expenses than the vast majority of its peers. And those super-low fees give the fund a performance advantage that's hard to beat. This fund's returns over the last year or so have suffered because of airline-connected investments. The fund hasn't lost money, but it has badly trailed similar funds over the past 12 months. Nevertheless, its long-term record is still solid.

Like Vanguard, Fidelity offers a whole array of tax-exempt bond funds. The fund company runs funds specific to states like California, Florida and Arizona, and manages national funds as well. The (FLTMX Quote)Fidelity Spartan Intermediate Municipal Income (FLTMX) fund is one of them. This fund focuses on higher-quality muni bonds and also sports low expenses. The only major drawback: You have to cough up $10,000 to get in.

T. Rowe Price is another key stop to make if you're shopping for a tax-exempt bond fund. The fund company has all the right attributes: lots of offerings sporting solid records and low costs. And if you want a fund that invests in both stocks and municipal bonds, T. Rowe has that too. Its (PRTEX Quote)Tax-Efficient Balanced (PRTEX) fund has half its money in stocks and the other half in tax-exempt bonds. It's a good choice if you only want to buy one fund.