How should I invest my 529 plans for college?


Q. I have 529 plans for my kids, 14 and 13. They’re invested in age-based funds. I’m concerned about the stock market now. Should I put them in more conservative investments or just ride it out?
— Concerned parent

A. Timing the market is an age-old game played by investors with very little historical success.

Every time we think we have it figured out the markets proves us wrong.

By investing your children’s 529 accounts in age-based funds, you have taken all the guesswork out of the equation, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

He said he believes using age-based funds is still is a smart decision.

“The custodian will adjust the investments to a more conservative model as each of your children reach certain age targets,” Gallo said.

He said he assumes at your kids’ current ages, the funds are invested in a 40 percent stock and 60 percent bond allocation now, and that allocation will get a little bit more conservative in a couple of years.

“That means that at this time only 40 percent of their funds are subject to stock market fluctuations at this time, with the balance being invested in more stable bond or fixed income investments,” he said.

Gallo said you need to remember your goal is to have the funds earn enough to a least keep up with the ever-increasing costs of higher education. If you get too conservative, attaining that goal will become extremely difficult.

Plus, he said, these funds will be invested for another 8 or 9 years, so there is time for the markets to rebound even if they take a future downturn.

Gallo said the risk of trying to time the market is missing a continued upswing. Even if you are correct in getting out of the market prior to a downturn, knowing when to get back in is much more difficult, he said.

“My recommendation is stay the course and let the markets do what they do,” Gallo saod.

You know that the funds are being invested in a manner that will protect them based on a timeline of need.

“When you are going to start withdrawing the funds to pay tuition, they will be invested in a very conservative manner in an attempt to avoid a short-term loss,” he said.

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