Is it better to buy muni bond fund or the bond note itself, assuming the rate of return is the same?

Question

Both are tax free for California and Federal.

Answer 1

For individual investors, I would still recommend a fund.  If the one bond you invested in defaults (I know this is rare), you may loose much of your investment.  If it happens to the fund, the impact on you will be negligable.  It's back to the basics: dirvesify, diversify, diversify.  Effective diversification is not practical for most individual investors to do on their own.

Answer 2

well, the fund probably has expenses.  Bond insurers insure municipal bonds--that is how they get a high credit rating.  So municipal bonds are essentially riskless.  (Of course the insurer and the municipality could default, but the probability of this is probably extemely low.)  Who knows what will happen to your money if the bond fund goes bust.