Need 529 Advice *New to Investing*

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goldenbear1238
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Joined: Sun Nov 19, 2017 11:44 am

Need 529 Advice *New to Investing*

Post by goldenbear1238 » Sun Nov 19, 2017 3:22 pm

I have two children (5 & 2) that I've started 529 Accounts for with Scholar Share (a CA 529 savings plan). I am a CA resident. The current balances are just a few thousand dollars, but I intend to increase each account by $20K within the next 6 months.

I like Scholar Share because the US Index Equity Fund and Index US Large Cap Equity Fund have very low costs (.08% and .09% ER respectively)....which are actually lower than the Vanguard 500 Index Portfolio (.16% ER). All 3 funds are comprable in performance YTD, 1 YR, and 5 YR. Unfortunately, the other funds within Scholar Share are slightly more expensive than Vanguard's funds.

If I plan to invest the additional $20K in each 529 in the next 6 months, which types of funds should I put it in and should I put it into Vanguard 529's instead of the existing Scholar Share 529's?

pkcrafter
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Location: CA
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Re: Need 529 Advice *New to Investing*

Post by pkcrafter » Mon Nov 20, 2017 12:43 am

Welcome Goldenbear,

Have you looked at Saving for College website? It as a lot of information about options.

http://www.savingforcollege.com/investm ... ?plan_id=5

You can do age based passive at low cost. The portfolio has U.S. large, international, REIT and bond and the asset allocation changes as the child gets closer to college. You can also do static, which contains the same asset classes, but the asset allocation does not automatically change. Third choice is to use the individual funds. The funds listed are all you need. If you do individual, use U.S large cap (S&P 500, I believe), international if you wish, REIT optional, and bond in the proportion you choose. I think age based or static would be a good choice.

By the way, if you use Vanguard I don't think you will get the tax-free growth.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

goldenbear1238
Posts: 2
Joined: Sun Nov 19, 2017 11:44 am

Re: Need 529 Advice *New to Investing*

Post by goldenbear1238 » Mon Nov 20, 2017 2:06 pm

Thanks Paul!

I'll do some additional research on the age based passive funds. I like the calculator that allows one to input the specific financials to see total costs.

Thanks again

workerbeeengineer
Posts: 41
Joined: Thu Jun 02, 2016 12:22 am

Re: Need 529 Advice *New to Investing*

Post by workerbeeengineer » Thu Nov 23, 2017 1:52 pm

pkcrafter, can you further explain your comment on use of Vanguard means one does not get tax-free growth? One counter example - Nevada 529 plan is Vanguard, and offers a good selection of individual funds (as well as age based). If you mean that another choice is to NOT use a 529 plan and just invest in an after tax Vanguard account (or any other mutual fund complex) then agree (but not sure why most people would not want the tax free growth?).
pkcrafter wrote:
Mon Nov 20, 2017 12:43 am
Welcome Goldenbear,

Have you looked at Saving for College website? It as a lot of information about options.

http://www.savingforcollege.com/investm ... ?plan_id=5

You can do age based passive at low cost. The portfolio has U.S. large, international, REIT and bond and the asset allocation changes as the child gets closer to college. You can also do static, which contains the same asset classes, but the asset allocation does not automatically change. Third choice is to use the individual funds. The funds listed are all you need. If you do individual, use U.S large cap (S&P 500, I believe), international if you wish, REIT optional, and bond in the proportion you choose. I think age based or static would be a good choice.

By the way, if you use Vanguard I don't think you will get the tax-free growth.

Paul

BogleBoogie
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Location: AK

Re: Need 529 Advice *New to Investing*

Post by BogleBoogie » Thu Nov 23, 2017 1:53 pm


xerxes101
Posts: 31
Joined: Sat Oct 14, 2017 11:25 am

Re: Need 529 Advice *New to Investing*

Post by xerxes101 » Thu Nov 23, 2017 6:04 pm

goldenbear1238 wrote:
Sun Nov 19, 2017 3:22 pm
I have two children (5 & 2) that I've started 529 Accounts for with Scholar Share (a CA 529 savings plan). I am a CA resident. The current balances are just a few thousand dollars, but I intend to increase each account by $20K within the next 6 months.

I like Scholar Share because the US Index Equity Fund and Index US Large Cap Equity Fund have very low costs (.08% and .09% ER respectively)....which are actually lower than the Vanguard 500 Index Portfolio (.16% ER). All 3 funds are comprable in performance YTD, 1 YR, and 5 YR. Unfortunately, the other funds within Scholar Share are slightly more expensive than Vanguard's funds.

If I plan to invest the additional $20K in each 529 in the next 6 months, which types of funds should I put it in and should I put it into Vanguard 529's instead of the existing Scholar Share 529's?
The last time I checked, State of California does not give you a tax break to invest in its 529 plan. Certain other states give you a tax break on the State income tax for investing in 529 plans, e.g. VA. So given your situation, I would try to find the state with lowest 529 investment expense ratios and invest through them. Off the top of my head Utah and West Virginia 529 plans come to mind, but I encourage you to research them online. The California ERs seem reasonable to me but of course I would try to go lower if I can, since there is no tax advantage for you to invest in the California 529 plan.

pkcrafter
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Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
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Re: Need 529 Advice *New to Investing*

Post by pkcrafter » Thu Nov 23, 2017 7:10 pm

workerbee:
pkcrafter, can you further explain your comment on use of Vanguard means one does not get tax-free growth? One counter example - Nevada 529 plan is Vanguard
You are correct. I did not know Nevada was Vanguard's default 529.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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