SPDR Barclays Capital CA Muni Bond ( CXA), up 18.0% PowerShares Insured California Muni Bond ( PWZ), up 17.2% iShares S&P CA AMT-Free Muni Bond ( CMF), up 15.0% By comparison, the S&P 500 SPDR Trust ( SPY) is up 7.5% Despite those strong returns, I believe it is more sensible for high-net-worth investors to diversify nationally for muni bond exposure. Banking on the general obligation debt of the lowest-rated state in the union alone isn't worthy of the additional tax-free yield. For instance, an investor in the top federal bracket of 35% can garner an approximate tax-free equivalent yield of 6.8% in PowerShares Insured National Muni ( PZA). He or she might be able to obtain 7.7% in approximate tax-free equivalent yield in PowerShares Insured California Muni. Stretching for the additional yield, however, invites greater price volatility. What's more, as recently as two years ago, a leading credit-default-swap service ranked California as the 10th most likely government to default, with a 25% probability. Have things in California improved so much over the past two years that the state no longer faces the threat of defaulting on its obligations? Is a U.S. government bailout so entirely certain that one should stretch for the extra percentage point? My advice? Stick with national muni ETFs such as PZA or iShares S&P National AMT-Free Muni ( MUB). You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can follow me on Twitter @ETFexpert.