More aggressive 529 with downturn?

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capitalG
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More aggressive 529 with downturn?

Post by capitalG »

I think every variation of "stay the course vs market timing" has been posted in the recent downturn but I didn't see this one. We established 529 accounts via Vanguard for both of our children when born and have recurring contributions going to the accounts. We chose a "set it and forget it" managed fund-of-funds approach with the "moderate age-based" rating and the current allocation is 80 stocks/20 bonds. Since we continue to contribute and don't expect to need the money for a while (both kids <5, targeted the money for college), I'm debating whether it would make sense to change my AA to the "aggressive growth" fund-of-funds approach given the current downturn. I am comfortable with big swings in the 529 account balance as I hardly even check the account balance. Curious to hear perspectives from others in a similar situation and/or contemplating similar AA changes.

capG
DarkHelmetII
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Re: More aggressive 529 with downturn?

Post by DarkHelmetII »

Maintaining our 529 AA. New contributions buying stock at discount as bonds are now overweight.
New Providence
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Re: More aggressive 529 with downturn?

Post by New Providence »

I'm a risk taker, but not on the 529. I consider that investment to be my kids money and not mine.

To answer your question, I'm keeping the allocation (which is similar to yours) and not making any changes, but considering increasing the monthly contribution if there are further stock mkt drops.
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Magnetar
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Re: More aggressive 529 with downturn?

Post by Magnetar »

I did this exact thing a week ago. I took the opportunity to try to juice my returns by moving one of my 529 accounts from interest accumulation to high growth. I figured I am gambling with the money, but, I will make up the shortfall if need be. My plan is to move the money back to interest accumulation by the end of the year.
"Without discipline, no matter how good you are, you are nothing! One day, you're going to meet a tough guy who takes your best shot. Don't get discouraged. That's when the discipline comes in."
Outer Marker
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Re: More aggressive 529 with downturn?

Post by Outer Marker »

I'm thinking of going the opposite direction. My time horizon is shorter. My kids enter college in 2 and 5 years respectively. I had been 60/40, but strongly considering 20/80 or even 100 percent bonds. Was relieved that the funds have bounced back considerably of late, and am only down $10,000 on $240,000 year over year. I'm thinking I should take the short term gift the market has given in the last few weeks and lock this money down. My retirement portfolio is 70/30, but there's not the same luxury of time to recover here...
Broken Man 1999
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Re: More aggressive 529 with downturn?

Post by Broken Man 1999 »

The 529 plans for the grandchildren were set up as aggressive age-based. However, I have changed future contributions to 100% Vanguard Total Stock Market Index. I think in hindsight I should have gone with 100% Total Stock Market from the beginning. Even though their holdings were aggressive age-based, my oldest granddaughter's AA was 60/40, and she is eight years away from college. That doesn't seem so aggressive to me. I think holding bonds might have been OK starting around five years from college.

Their 529 plans are for expenses other than tuition, as they all have prepaid tuition plans already. So, most likely no heavy lifting for the 529 plans. Though, where they attend will determine how far their prepaid plans will take them.

They might use the money for dorms, books, cars, fraternity dues, sorority dues, whatever.

I am being cautious with the contributed amounts at this time. As DW and I get deeper into retirement, I probably will feel more comfortable to throw more dollars at the plans.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
jb3
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Re: More aggressive 529 with downturn?

Post by jb3 »

My kids are 4 and 6 years from starting college. I recently moved to a conservative glide path. Roughly 20 stocks/80 bonds and fixed income.

If my kids were very young I would go moderate or aggressive.
slowbutsteady
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Re: More aggressive 529 with downturn?

Post by slowbutsteady »

Keeping the aggressive AA I had over the years. My kids range from 6 to 15. But for one with 80/20, the rest are 100/0.

I am aware of the risk of market decline about the time our first starts college in 3 year's time. It's a risk we are able and willing to take.
The tortoise wins every time I read that story.
mega317
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Re: More aggressive 529 with downturn?

Post by mega317 »

capitalG wrote: Sat Apr 11, 2020 8:14 am I think every variation of "stay the course vs market timing" has been posted in the recent downturn but I didn't see this one.
I don't see why one would expect a different result from market timing in a 529 than in any other account.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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capitalG
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Re: More aggressive 529 with downturn?

Post by capitalG »

Thanks for the perspectives. Seems like a running theme for some of you is that you are using this event as a time to “correct” your 529 AA to match your true risk tolerance (up or down).

Piece of advice I just got IRL is a good one - compare the risk tolerance I take in my retirement AA (currently 85/15) and see if it is consistent w the 529 AA (currently 80/20). Given the different horizons involved, feels consistent to me and I’m not changing my retirement AA, so no change to 529 AA. Thanks all for the input!

CapG
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