The cost of college continues to rise, and many families are looking for ways to save for their children’s education. One of the most popular options is a 529 college savings plan. This plan is designed to help families save for college in a tax-advantaged way. But what are the investment options available in a 529 college savings plan?
MESP one of two 529 college savings plans nationwide to earn elite “Gold” rating from Morningstar, offers a variety of investment options. The options vary in investment strategy and degree of risk, ranging from conservative investment to more aggressive ones. The options are divided into age-based portfolios and static portfolios. Age-based portfolios are designed to become more conservative as the beneficiary gets closer to college age, while static portfolios offer a wider range of investment and allow the investor to customize the portfolio to their individual needs.
For example, Neutral-rated College savings Iowa 529 Plan offers four risk-based portfolios and eight static portfolios. The risk-based portfolios are composed mainly of mutual funds from Vanguard or Capital Group, Fidelity provides choice (active, passive, and blend) of their own funds. The static portfolios have a wide variety of investment, including funds from Putnam, T. Rowe Price, and BlackRock.
Morningstar Medalist plans offer investment options that should outperform the average college savings plan. The Vanguard 529 College savings Plan, Pennsylvania 529 investment Plan, and CollegeAdvantage savings Plan are three of the Medalist plans. These plans offer a variety of investment, including Vanguard index funds, Vanguard ETFs, and actively managed funds from Vanguard, Fidelity, and T. Rowe Price.
Vanguard continues to maintain its lead within 529 plan investment options, holding an approximately 30% market share, followed by Capital Group, Fidelity, and T. Rowe Price. While the majority of 529 plans offer Vanguard funds, some smaller plans may not. It is important to check the investment options of each plan before investing.
It’d be nice to have the option to invest in individual stocks, but 529 plans do not typically offer this option. Instead, investor must choose from the available mutual funds and ETFs. For those investor looking for more customization, some 529 plans offer a “custom portfolio” option. This allows investor to choose the individual investment that make up the portfolio.
You’re allowed to change investment choices twice each calendar year. If you are worried about the performance of your investment, it may be wise to move some of the funds into a low-risk option within the 529 plan, such as a money-market fund or a CD.
There are lots of benefits to automated investing, but it does not play as big a role in 529 plans as it does in other types of investment. Many 529 plans offer a “target date fund” option, which automatically adjusts the portfolio as the beneficiary gets closer to college age. But, it offers a wider array of investment options than 529s.
You can open a 529 through Vanguard, for example, offered on behalf of the State of Nevada. This plan offers a wide variety of Vanguard funds, as well as funds from other investment companies. It also offers a “custom portfolio” option for those investor looking for more customization.
When it comes to 529 college savings plans, investor have a variety of options to choose from. It is important to do your research and compare the different plans and investment options before investing.
