How to Invest College/Med School Fund?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
A-Commoner
Posts: 154
Joined: Thu Apr 24, 2014 7:17 pm

How to Invest College/Med School Fund?

Post by A-Commoner » Sun Apr 15, 2018 12:31 pm

How would you invest a college/med school fund of about $650k today when the student is only a freshman in college? From what I’ve seen, $650k should be enough to pay for the next 7 years of undergrad and med school, even at full pay private school rates. The assumption here is that the student will in fact go the whole nine yards, do well in undergrad, MCAT, med school and graduate as a full pledged MD. Med school may not happen, of course, in which case the money could fund other pursuits/life goals for the student. In other words, education is fully funded as of today with the student just a college freshman. What asset allocation would you put the money in? Cash seems overly conservative. Bonds? Interest rates are rising. 50:50 stock:bond?

letsgobobby
Posts: 11576
Joined: Fri Sep 18, 2009 1:10 am

Re: How to Invest College/Med School Fund?

Post by letsgobobby » Sun Apr 15, 2018 12:41 pm

How badly would loss of some of these funds hurt? I suspect you have plenty of other assets and/or income to pay for these expenses if your education fund were to lose money. In that case I would not be any less aggressive than 50/50 stocks/bonds, and perhaps up to 80/20.

cmr79
Posts: 41
Joined: Mon Dec 02, 2013 4:25 pm

Re: How to Invest College/Med School Fund?

Post by cmr79 » Sun Apr 15, 2018 12:59 pm

If that's what this money is designated for, why keep taking substantial risk when you've won the game today? These are inflexible short- to medium-term expenses, so losing 25-40% would cause me a lot more angst than trying to grab additional yield beyond what is already needed to keep up with higher education inflation costs.

I invest my (very young) childrens' college funds aggressively, but I will likely move them to at least 80% short term treasuries or an equivalent fund as they approach college.

GAAP
Posts: 588
Joined: Fri Apr 08, 2016 12:41 pm

Re: How to Invest College/Med School Fund?

Post by GAAP » Sun Apr 15, 2018 1:11 pm

My choice a few years back was BIV -- Vanguard Intermediate Term Bond ETF. It generally kept ahead of inflation, always outperformed money market, and usually threw off enough dividends to avoid a lot of sales. Not reinvesting dividends in a mutual fund made the tax record keeping much less onerous and provided some opportunities for TLH.

In your situation, I would probably set aside enough for the next year in money market (to avoid tax issues), and then put the rest in BIV.

GCD
Posts: 537
Joined: Tue Sep 26, 2017 7:11 pm

Re: How to Invest College/Med School Fund?

Post by GCD » Sun Apr 15, 2018 1:37 pm

As noted above, I think it is completely dependent on what your other resources are. Congrats on being able to pay for tuition beyond college. :beer

Just as a point of comparison, FWIW. We have 15 and 13 year old kids and have our 529 in Vanguards conservative age based option for a 15 year old. They will be hitting college in 3/4 years respectively. That puts all our 529 money in a 50% bond / 50% short term reserves mix.

I have other money, but don't plan on spending it on tuition. We have a little less than half of what you do in the 529, but for 2 kids not one. We hit the number we were aiming for and took our money out of the game.

A-Commoner
Posts: 154
Joined: Thu Apr 24, 2014 7:17 pm

Re: How to Invest College/Med School Fund?

Post by A-Commoner » Sun Apr 15, 2018 1:43 pm

Thanks for the input. My inclination is to go conservative as well and in fact, that’s what half of the money is in. Half of the 650k (roughly 300k) is in a 529 age based portfolio which at this stage has the money mostly in cash. The other 350k is in various taxable stock and bond funds. My concern about going too conservative is the risk of education cost inflation which just seems unstoppable.

GCD
Posts: 537
Joined: Tue Sep 26, 2017 7:11 pm

Re: How to Invest College/Med School Fund?

Post by GCD » Sun Apr 15, 2018 2:47 pm

Hmmm. Yeah. So if you want to stay conservative, the Vanguard Conservative Age Based 529 fund for 11 year olds is 10% stock and 90% bonds. That's for a kid hitting college in 7 years. The aggressive age based fund is 60% stock, 40% bonds for an 11 year old.

You make a good point about tuition inflation and the 7 year timeline of schooling ahead of them.

amitb00
Posts: 426
Joined: Sun Jan 01, 2012 9:04 am

Re: How to Invest College/Med School Fund?

Post by amitb00 » Sun Apr 15, 2018 3:00 pm

My daughter joined 8 year integrated MD program at Brown University (PLME) in 2016. So my expenses are of the order you are anticipating. I have put money in TRowePrice age based portfolio 2015, 2018 and 2021. I started using 2015 first and now am using 2018. Since I need money over 8 years, I did not want to put in just one age based portfolio. In addition I have money in Vanguard total US 529. I know that is aggressive but in case market tanks, I have two other kids and will change beneficiary to younger ones and use money from those kids age based portfolio.
HTH, Amit

Post Reply