<p>My kids' 529 savings plans have many investment options - stocks funds, bonds funds, and even the bank deposit portfolio.</p>
<p>All my kids are in college now. How much of stock exposure should they have in their 529 investments? 20%? 10% 0%?</p>
<p>I'm very concern that their 529 savings would not withstand another market decline like in 2009. They need their 529 to pay for college expenses.</p>
<p>Vanguard has 3 “age based option” portfolios where they automatically tweak the mix as the child approaches or enters college.
eg. if the child is 0-5 years old,
conservative portfolio is 50% stock and 50%bonds
Moderage option is 75% stock and 25% bonds
whilethe aggressive one is 100% stock</p>
<p>this gradually changes with age, eg. at 16-18 years:
conservative is 0% stock, 75% bonds, and25% short term reserves
while aggressive still has 25% stock and 75% bonds</p>
<p>after 19, the conservative goes totally to short term reserves while the others still maintain some level of risk/reward. Even if you don’t use them, it may be useful for you to refer to the way they’ve done it as a reference.</p>
<p>There is no “right” answer for this question. It comes down to risk tolerance really. The age funds are ok but not always the best options either as they are pretty set in stone. One thing with the 2008 crash was that bonds were not responding in the normal stock/bond relationship so these age funds didn’t account for that. Also, for a while, international stocks were off the charts, did your funds have any of those and if not, you missed out on some really, really nice gains. Diversity is the best way to whether most markets, but diversity in all areas, different stocks, bonds, cash, real estate, etc. It’s really best to sit down with your financial planner and look specifically at your account because even account to account, state to state, the mix is going to be different and the returns different as well.</p>
<p>You answered your own question. Since “… their 529 savings would not withstand another market decline like in 2009,” you need to have their money out of the market.
Generally, you could have money needed in less than a year in a savings or money market account and money needed in more than a year in CDs (which make more, but are locked up for a period of time).
Yes, you won’t make much interest on any of this at all, but that is what short-term investing does.</p>
<p>I had a kid in the HS class of 2009. He was in an age based fund. I thought it turned into 100% FDIC insured his senior year, or when he turned 18. Turned out that it was still 25% in stocks his senior year, and that part took a big hit.</p>
<p>beolein stole my post. I agree you answered your own question:</p>
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<p>Therefore the funds should be invested short, liquid and safe. FDIC bank deposits would be a good option if available.</p>
<p>College freshman: her 529 is 3/4 principal + interest, 1/4 age-related but moving this portion out soon. She will need it for college expenses.</p>
<p>D2016: 1/2 100% equities, 1/4 age-related, 1/4 principal + interest. Moving some equities out soon.</p>