Municipal bond mutual funds have surpassed the performance of the S&P 500 in the past 15 years. Look what a $10,000 investment on Sept. 30, 1999, in the Barclays municipal bond index would have done. By Oct. 22 this year, it would have grown to $22,199, according to Morningstar Inc. The same investment in the S&P 500 would have grown to $19,968. Munis are outperforming this year too, gaining 8.5% vs. the S&P 500’s 5.9%.