My 3-part strategy
- First, I’m investing in a 529 plan because it’s aligned to my specific goal: saving for college. Plus it offers generous tax benefits, like deferred income tax on earnings, which gives my savings more potential to grow and compound faster.*
- Next, I’m trusting my asset allocation. My kids’ college savings are invested in a mix of stocks and bonds, with the allocation driven by how many years we have until they graduate from high school. This mix allows us to benefit from the long-term growth stocks have traditionally provided while supplying some ballast when the markets get choppy. And I’ve made things even easier by choosing an age-based portfolio within my 529 plan. This portfolio automatically adjusts its allocation to become more conservative as we get closer to graduation and those first tuition bills. As a busy parent, I’m often pulled in 20 different directions, so convenience is important to me. While I still check periodically to see that my allocation remains in line with my goals, investing in an age-based option has helped me keep one more thing off of my to-do list.
- Finally, I’m trying not to react to recent volatility. Markets go up, and markets go down—sometimes by dizzying amounts in the short term. But what’s important for your long-term success is that you don’t let fear guide your decisions. Vanguard’s respected founder, Jack Bogle, proclaimed that often the best investing advice in times of market turbulence is simply, “Don’t do something, just stand there!”
That’s why I’m staying the course. While dramatic market swings can be stressful, they’re not unusual. And history tells us over the long term, markets bounce back and reward investors who have the fortitude to withstand the ups and downs. I’m determined to maintain that approach so that our college savings goals can remain on track.
So that’s my line of defense: Save in a 529 plan, trust in an appropriate asset allocation, and stay the course. I know that’s often easier said than done, but it’s been proven that investors who adopt this approach are almost always rewarded over the long term.
Finally, I invite you to join our community. Post a comment below to share your tips for dealing with volatility, or just read on to see what other investors are saying about it.
*The availability of tax or other benefits may be contingent on meeting other requirements.
For more information about any 529 savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Other state benefits may include financial aid, scholarship funds, and protection from creditors. Vanguard Marketing Corporation serves as distributor for some 529 plans.
All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future results.
Diversification does not ensure a profit or protect against a loss.
Investments in bonds are subject to interest rate, credit, and inflation risk.
529 College Savings Day is a registered service mark of Ascensus Broker Dealer Services, LLC.