Stock market making you nervous? Then how about an alternative, a safer investment that beat stocks over the past five years – and did it without all the scary ups and downs?

I’m talking about dull, tax-free munis – short for the municipal bonds sold by state and local governments to raise money for roads, schools, hospitals and other public projects.

For many investors, munis should be especially appealing right now because they have recently become slightly more generous compared with their main competitor, U.S. Treasury bonds. That means munis should attract middle-class folks as well the wealthy.

“Municipals are not just for millionaires,” says Bob Auwaerter, head of Vanguard Group’s enormous fixed-income operation.

For the five years ended Dec. 31, muni returns averaged just under 6 percent a year, while stocks, with typical taxes taken into account, returned just over 4 percent, according to T. Rowe Price, the Baltimore mutual fund company.

The key to munis is the tax-free treatment of their interest earnings, or yield. There’s no federal tax, and usually no state or local tax for bonds issued in your state. (You do pay federal capital gains tax on the profit if you sell a muni for more than you paid.)

Because of the tax treatment, muni yields are lower than those of taxable interest-bearing investments such as bank savings or Treasury and corporate bonds. Comparisons, therefore, must look at what you would actually keep after paying tax on the taxable investment.

On March 30, for instance, top-quality 10-year munis carried average yields of about 4 percent, while yields on 10-year Treasuries were 4.62 percent.

But a well-to-do investor in the top tax bracket would lose 35 percent of the Treasury earnings to taxes, slashing that yield to about 3 percent.

Since there’s no tax on the muni income, its 4 percent yield is higher on an after-tax basis.

This is why munis have long appealed to people in high tax brackets.

But now consider middle-class investors, such as a married couple with a joint annual income of $63,700 to $128,500. That puts them in the 25 percent tax bracket this year.

On an after-tax basis, the 10-year Treasury would pay this couple 3.47 percent, while they could make 4 percent on the muni.

Auwaerter at Vanguard said that munis have become especially attractive recently because the gap between their yields and Treasury yields has narrowed as the markets adjust to news of a slowing economy. Treasury rates have fallen faster.

Munis’ stock-beating performance during the past five years was not typical. It was helped by the stock-market plunge in the early part of the decade. Over long periods, stocks usually do better.

But most investors should have some safer holdings to ride out the stock market’s slumps. Historically, top, AAA-rated munis are nearly as safe as Treasuries and bank savings.

Unless you have at least $1 million to put into munis, you’ll do better investing through mutual funds rather than buying individual bonds, he said. That’s because small investors are usually charged pretty high fees on muni trades, he said.

Auwaerter recommends funds with munis maturing in 10 years or less. Yields are a tad higher on funds with longer maturities, but not enough to offset the risks of tying your money up.

Shop for muni funds at www.morningstar.com, and look for those that keep fees low.

The cheapest charge less than 0.2 percent a year. To save on state taxes, look for funds that specialize in munis from your state.