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Types of Investment Options

As the account owner, you can select from a variety of investment options for your 529 college savings plan

One of the greatest benefits of 529 college savings plans are that investment options are managed by professional financial institutions. As the account owner, you select the investment portfolio that meets your needs, rather than picking individual securities to invest in.

Each 529 plan offers multiple investment options for you to choose from, each comprised of different funds allocated based on the level of investment risk.

While option specifics will vary between plans, most 529 plans offer two main types of investment options:

Age-based Investment Options

For age-based investment portfolios, the asset allocation changes over time based on the child’s age and the length of time until the money will be used. Investment options begin with more aggressive asset allocations and shift to more conservative allocations as the account beneficiary ages and gets closer to needing the money

Static Investment Options

All of your account assets will be allocated to the portfolio or portfolios of your choice. Unless you elect to change your investment option through your 529 plan provider, your selected portfolio option remains in effect as long as the account remains open.

For static investments, you can choose to invest your 529 plan finds with a single mutual fund (referred to as an Individual Portfolio or Single Fund Portfolio) or a Multi-fund Portfolio invested in two or more mutual funds, usually with a mixture of stocks and bonds (also referred to as a Target Portfolio or Blended-fund Portfolio).

A general investing principal is risk reduction over a shortening time horizon. Because static options do not automatically adjust in this way, they place the burden of risk reduction on the shoulders of the investor. For this reason, static options may be more appropriate for investors who are willing to make strategic changes manually.

You are allowed to change the investment options, but the IRS permits this only once per calendar year or when the beneficiary is changed. This rule does not apply to automatic readjustments for age-based or other non-static funds.

You can find more detailed information on specific 529 plan investment options using the tool below.

Many plan providers publish information on past investment option performance. It is worth noting that while this information is useful for getting a sense of the historical performance of a certain investment option, it is in no way a guarantee for future performance and there is always risk associated with investing.

None of the above information should be construed as investment advice or recommendations. Each individual investor should consider an investment option’s risks in light of his or her own risk tolerance, time horizon, style and personal situation prior to making an investment decision.

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