For those who are looking for low risk investment tax exempt municipal bonds are an attractive option. Investors seek this type of investment since they are completely free from federal income tax. There are numerous advantages associated with tax exempt municipal bonds for many investors. They offer tax advantages for the state and local tax situation. These bonds can be beneficial for investors with high tax brackets. The funds for this type of investment is used for projects such as repairing roads and school renovations. There are many bonds that offer high liquidity and with these bonds it is possible to sell your investment and recover the capital. Though all municipal bonds do not offer high liquidity there is no penalty for tax which is one of the biggest advantages for the investors. These bonds allow your income can grow faster since a large balance is compounded.