Investing in an educational 529 plan

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Investing in an educational 529 plan

Post by jnordberg20 » Thu Feb 13, 2020 1:19 pm

I have two kids, 3 YO and 2 YO...I have contributed $10,000/year for each - total $50,000. The money was invested with my CFA - looking more closely at it, he has invested in two funds - Blackrock Global Allocation part C and part A (MCLOX and MDLOX). Each fund have high expense ratios and high turnover rates - MCLOX expense ratio 1.82% and turnover rate of 156%, MDLOX expense ratio 1.08% and turnover rate of 156%. I guess my question is...if I open a 529 account for each kid in my Vanguard account, rollover the existing I sell the two funds, or stick it out with what I have and buy low cost stock/bond index funds from here on out? The two funds are both up about 13% in my portfolio. Thank you

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Re: Investing in an educational 529 plan

Post by lakpr » Thu Feb 13, 2020 2:37 pm

Sell the funds and invest in Vanguard's either age-based plans or do-it-yourself plans.
As the saying goes ... "when you find yourself in a hole, the best strategy is to stop digging".
If you remain in the plans, you will still be "digging yourself a hole", metaphorically speaking.

Edited to add: FIRE your advisor. He cared more about getting his commissions than your needs. Not sure what you are paying him for ...

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Re: Investing in an educational 529 plan

Post by UnclePennybags » Thu Feb 13, 2020 2:49 pm

The key thing in common with both of those funds is a "sales charge" that provides your advisor with a commission. The funds are otherwise no worse than many other funds with high fee structures, but you lose money over time being invested in any high fee fund and I would advise you to sell them immediately and convert the proceeds into the low cost funds you were planning to invest new money in. The fees are a significant drain on your return every single year.

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Re: Investing in an educational 529 plan

Post by 1789 » Thu Feb 13, 2020 3:47 pm

I would leave the adviser and the funds today and don't look bad. You cant get any money out of those funds in long term.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: Investing in an educational 529 plan

Post by sycamore » Thu Feb 13, 2020 4:49 pm

Ditto to the suggestions on leaving the advisor.

Just to clarify, are those MCLOX and MDLOX funds already in a 529, or some kind of taxable account?

Most (all?) 529 plans only let you buy funds that are in their "menu" of allowed funds, and you can't simply transfer the funds from one 529 plan to another. So if those BlackRock funds are already in a 529, you should sell them before transferring.

If you're opening 529 for the first time, do some research on which state's 529 is best. Typically you want to pick your home state plan if it offers you a tax benefit for contributions. Besides that, frequently you'll see Utah's my529 and Nevada's "The Vanguard 529 College Savings Plan". Nevada is the one directly associated with Vanguard but other state plans offer Vanguard funds as well.

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