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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
When investing in a 529 account, you may want to consider a more active approach than the typical age-based portfolio option. Reasons to Think About Actively Managing Your 529 Investments By Britt Erica Tunick When it comes to financing a child’s or grandchild’s college education, 529 savings plans have become one of the most popular ways of saving. However, when it comes to the investment approach you choose for the money you put into these accounts, you may want to take a more active path than the age-based portfolio option most 529 plans encourage. The money put into age-based investment portfolios is managed based on the current age of the child whose education is being saved for and the year that they are expected to begin their higher education and will need to access that money. As it gets closer to that target year money within the portfolio is increasingly shifted into more conservative investments with lower risk. Taking such a cookie-cutter approach may not always be best, as it often doesn’t take into account changes in the economy or stock market. Also, in many cases, the investments in such portfolios aren’t altered as frequently as they would be within actively managed portfolios. To better diversify the money you put in 529 plans, one thing you can do is to have a financial advisor occasionally review your investment to be sure that it is being managed actively enough to generate the returns needed to meet your goals, or to help customize the investments within your portfolio. Financial advisors often have access to a bigger range of 529 plans than the average person and can even direct the money into mutual funds, where there is much more investment flexibility. If, however, you do not have a financial advisor one easy way to better diversify your 529 savings on your own is to open two different 529 portfolios, taking an aged-based approach in one and a more aggressive approach with the other. Just keep in mind that most 529 accounts limit the number of changes that can be made to the investment approach you pursue within them. |
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