{"id":1097,"date":"2025-04-14T13:15:41","date_gmt":"2025-04-14T13:15:41","guid":{"rendered":"https:\/\/finzexpert.com\/blog\/how-should-you-invest-in-529-college-savings-plans-during-market-swings\/"},"modified":"2025-04-14T13:15:41","modified_gmt":"2025-04-14T13:15:41","slug":"how-should-you-invest-in-529-college-savings-plans-during-market-swings","status":"publish","type":"post","link":"https:\/\/finzexpert.com\/blog\/how-should-you-invest-in-529-college-savings-plans-during-market-swings\/","title":{"rendered":"How Should You Invest in 529 College Savings Plans During Market Swings?"},"content":{"rendered":"\n<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Investing in choppy markets, especially with an unpredictable president at the helm, can be distressing. It can be even more so if you are relying on these investments to pay for something as important as your child\u2019s college tuition, and you need the money in the foreseeable future.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Plenty of busy parents found themselves in this position last week, reminded by the recent market plunge that college enrollment was creeping up on them, and some may not have dialed back their risky stock positions, or at least not enough.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But situations like this serve as another reminder: Market uncertainty is a constant, and yet it is part of the game we are forced to play to finance our future selves\u2019 needs and wants. Markets periodically plunge because of global financial crises, pandemics, technology bubbles, and when the president of the United States seemingly pushes it over the edge with his index finger, which is essentially what happened after President Trump announced an aggressive tariff plan that sparked a trade war.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">When Mr. Trump noticed on Wednesday that U.S. government bond markets were trembling, or getting \u201cyippy,\u201d as he called it, he paused most of his so-called reciprocal tariffs.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">The markets rejoiced, sending the S&amp;P 500 soaring up 9.5 percent, before sliding nearly 3.5 percent on Thursday and recovering 1.8 percent on Friday, with one measure of volatility reaching levels last seen during the pandemic-induced sell-off in 2020. The S&amp;P 500 has sunk 12.9 percent since Feb. 19, when it reached an all time closing high. Nobody knows what comes next, or how this movie ends.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">If you have money in a 529 college savings plan \u2014 or in another type of investment account \u2014 now is the time to reassess whether your mix of stocks and bonds are appropriate for your time frame and your stomach for risk.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">If you cannot afford to lose a particular pot of money, and you need it soon, it is time to develop an exit strategy. For everyone else, you have the luxury of time to come up with a better long-term plan.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-356fd5e0\">I need the money now (or really soon). Now what?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">If you need the money in less than a year, it shouldn\u2019t be in stocks, period. Some financial planners said they\u2019d even swallow some losses now (by moving money into cash, even if your investments are lower), but there are several other things you might consider as well.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cI\u2019d suggest looking at whether they have other resources to cover the first year \u2014 like cash flow, gifts, or student aid \u2014 while they give investments some time to recover,\u201d said <a class=\"css-yywogo\" href=\"https:\/\/fiduciaryorg.com\/woodmark-advisors-about\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Daniel Milks<\/a>, a financial planner in Greenville, S. C.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">If you borrow more than you anticipated during the first year to avoid touching your investments, keep in mind that you can use <a class=\"css-yywogo\" href=\"https:\/\/www.savingforcollege.com\/article\/strategies-for-using-a-529-plan-to-repay-student-loans\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">up to $10,000<\/a> of money inside a 529 to pay off federal and many private student loans early (per beneficiary over their lifetime). Another idea: Temporarily pause or reduce savings to pay more tuition directly.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-3b9eeaac\">I have some time. What should I do?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Sometimes the best solution is the simplest \u2014 the one that reduces complexity and decision-making and puts things on autopilot. Sure, there may be more precise investing strategies, but there\u2019s a perfectly fine one called a target-date fund.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">If you have a big tuition bill coming up in September and you were in an appropriate and well-managed <a class=\"css-yywogo\" href=\"https:\/\/investor.vanguard.com\/accounts-plans\/529-plans\/profile\/4658\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">fund like this<\/a>, after these past two weeks of bluster and insane volatility, your portfolio is down just 0.35 percentage points. No lost sleep over that.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Target-date funds \u2014 whose mix of investments gradually get more conservative as a college enrollment date approaches \u2014 can be helpful for people who want a hands-off approach. But that means you\u2019ll need to do a bit of work upfront to analyze the funds, or hire someone to help you out (a fiduciary, always).<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Many 529 college savings plans provide these funds on their investment menu, but they\u2019re not all created equally. Funds from different providers that have the same enrollment date can have different mixes of investments, and some may be riskier because they have more aggressive stock allocations.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Don\u2019t forget to consider the type of bond and cash investments it holds, too. Bonds typically serve as a ballast when stocks drop, but they are not impervious to all shocks, as we saw this week.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">You\u2019ll also need to understand how the fund evolves over the years as you approach the enrollment date. How quickly does it change? What does it look like when college is just five or three years away? Would you be comfortable with that mix, at that point in time, if the market dropped 30 percent? And how does that compare with similar funds? What are the costs? (Stick with low-cost index funds, which simply track the performance of large swaths of the market and do not try to beat it.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">CJ Stermetz, a financial planer and founder of EquityFTW, a firm in San Jose, Calif., said that the funds work especially well in times like these, because parents don\u2019t have to worry. They know their college money is being whisked into safer investments as time marches on.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Indeed, the target enrollment date funds are similar to those targeting a retirement date, but the former sheds stocks more quickly given the compressed time frame: The funds generally start with 95 percent in stocks and five percent in bonds but then shift about 5 percentage points of the stocks into bonds each year, Mr. Stermetz explained. If you were buying a Vanguard fund for a newborn now, with a enrollment <a class=\"css-yywogo\" href=\"https:\/\/investor.vanguard.com\/accounts-plans\/529-plans\/profile\/w361#overview\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">date of 2043<\/a>, that\u2019s where you\u2019d start. It was down about 6.5 percent year-to-date, as of Thursday\u2019s market close.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But by the time college is three years away (like Vanguard\u2019s <a class=\"css-yywogo\" href=\"https:\/\/investor.vanguard.com\/accounts-plans\/529-plans\/profile\/4656\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">2028\/2029<\/a> fund), there\u2019s about 25 percent in stocks, 54 percent in bonds and another 20 in cash equivalents. That fund was down just 1.06 year-to-date as of Thursday.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Once college is just a year or two out (<a class=\"css-yywogo\" href=\"https:\/\/investor.vanguard.com\/accounts-plans\/529-plans\/profile\/4657\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">2026\/2027<\/a>), 19 percent of investments are in stocks, 47 percent in bonds and 34 percent in cash equivalents, while the target enrollment for the <a class=\"css-yywogo\" href=\"https:\/\/investor.vanguard.com\/accounts-plans\/529-plans\/profile\/4658\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">2024\/2025<\/a> academic year has just 15 percent in stocks. That\u2019s down 0.35 percent as of Thursday.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThis may not be \u2018optimal,\u2019 in the sense that it\u2019s a one-size fits all product, but most parents are fine with that since it means it\u2019s one less thing they have to think about,\u201d Mr. Stermetz added.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Keep in mind that if a fund\u2019s enrollment date that aligns with your child\u2019s feels too aggressive, you can choose one for an older child; it will have less invested in stocks.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">If you cannot afford to lose any money, Eric Maldonado, a <a class=\"css-yywogo\" href=\"https:\/\/www.aquilawealth.com\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">financial planner<\/a> in San Luis Obispo, Calif., suggests another approach:When your child is in high school, put the cost of the corresponding year of college into cash or money market funds. For example, if your child is a freshman in high school, put your freshman college tuition in cash, and so on.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cWhatever your mix of strategies, the key is to shift your mind-set as college nears,\u201d said Mallon FitzPatrick, head of wealth planning at Robertson Stephens. \u201cAt some point, the goal isn\u2019t to grow the money anymore. It\u2019s to make sure it\u2019s there when you need it.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\"><em class=\"css-2fg4z9 e1gzwzxm0\">Have specific questions? Write to me at <\/em><em class=\"css-2fg4z9 e1gzwzxm0\">tsbernard@nytimes.com<\/em><em class=\"css-2fg4z9 e1gzwzxm0\"> and my colleagues and I can answer them in upcoming newsletters.<\/em><\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Investing in choppy markets, especially with an unpredictable president at the helm, can be distressing. It can be even more so if you are relying on these investments to pay for something as important as your child\u2019s college tuition, and you need the money in the foreseeable future. Plenty of busy parents found themselves in [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1098,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[853,413,326,412,522,854],"class_list":["post-1097","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan","tag-college","tag-invest","tag-market","tag-plans","tag-savings","tag-swings"],"_links":{"self":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/1097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=1097"}],"version-history":[{"count":0,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/1097\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media\/1098"}],"wp:attachment":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=1097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=1097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=1097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}