Along the same lines, iShares issued a similar suite of bond ETFs that targets the muni market.

Here's that lineup:

iShares 2012 S&P AMT Free Municipal Series

iShares 2013 S&P AMT Free Municipal Series

iShares 2014 S&P AMT Free Municipal Series

iShares 2015 S&P AMT Free Municipal Series

iShares 2016 S&P AMT Free Municipal Series

iShares 2017 S&P AMT Free Municipal Series

The risks boil down to what happens with the states that are in the most trouble -- budget deficits, pension shortfalls, big drops in tax revenue, or any combination of the three.

All but one of the ETFs is heaviest in California, which is very bad off. Most of the funds have large positions in New York and Arizona, which also are troubled. For example, my home state of Arizona recently had to pass a new sales tax to prevent layoffs from many state departments including teachers.

There is divergent sentiment on the fate of the states and, by extension, their bonds. Investors interested in this category need to do research and decide for themselves. Anyone believing that states aren't in real trouble may do quite will with the funds. For what it's worth, I'm avoiding munis for our firm's clients.

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At the time of publication, Roger Nusbaum had no positions in the securites mentioned.

Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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