Vanguard 529 College Savings Plan???
- Thread starter Texas97
- Start date
RoundRobin
100+ Posts
I haven't worked with Vanguard but the best one I've seen is the Fidelity 529. You have the choice between picking individual funds or using their age based portfolio, the minimum lump sum investment is only $1,000 ($50 per month w/ systematic deposits) and you can get a Fidelity MBNA Mastercard that will deposit 2% of your purchases into the account. If you and your parents as well as the child's parents all use the cards you can make some serios deposits without much effort.
RR
RR
I don't use Vanguard for the 529, but I do have a Roth IRA set up w/ them, Vanguard 500 Index Fund. Basically mirrors the S&P 500. I did quite a bit of research prior to opening the Roth, Vanguard was attractive due to the extremely low service fees and solid annual returns. That was several years ago, so things may have changed a bit. I just put $ into it on a regular basis and try to forget it. Fidelity also offers some nice fund options and the post above sounds interesting.
R
ReyDelSol
Guest
Don't forget to write your congressman. The tax benefit associated with these is still scheduled to sunset in 2010.
The fine print on every 529 plan.
The fine print on every 529 plan.
R
ReyDelSol
Guest
What's amazing is that so many people look at fees. Fees, fees, fees. You know what...if you could see a fund that has consistently whipped Vanguard's tail (net of fees), would you still want Vanguard and its lower fees?
People have been conditioned that lower fees = more money in your pocket. That's what Fidelity and Vanguard have sold, and the masses have bought. Shameful really.
People have been conditioned that lower fees = more money in your pocket. That's what Fidelity and Vanguard have sold, and the masses have bought. Shameful really.
Coach,
I think it is prudent to invest in low-cost index funds. They won't outperform the market but they won't underperform either, and they will take less of my money in fees (and taxes) than higher priced actively managed funds. In the long run, I think that is a sound strategy. If you have a fund that can assure me it will outperform the Vanguard index funds I am in (net of fees and taxes) I will gladly invest heavily in it.
I think it is prudent to invest in low-cost index funds. They won't outperform the market but they won't underperform either, and they will take less of my money in fees (and taxes) than higher priced actively managed funds. In the long run, I think that is a sound strategy. If you have a fund that can assure me it will outperform the Vanguard index funds I am in (net of fees and taxes) I will gladly invest heavily in it.
JOSEYWALES66
100+ Posts
I'll preface this by stating that I have been a financial advisor for 15 years. So take that for whatever it is worth.
Picking an index fund has it place. Basically it is the conservative play. I use index funds when a client is a 5 on a 1-10 scale regarding risk.
My standard advice for any college savings plan using dollar cost averaging is to pick a good small cap mutual fund and stick with it, especially if they are starting to save while the child is very young. Once the child is getting closer to using the money, I recommend moving the money to a more stable investment. I re-evaluate mutual funds about every two years. In my opinion, any shorter time frame is not fair to the fund managers.
In regards to 529's, I personally don't recommend them. It's too early to have any return figures to compare. The biggest upside to a 529 account is that the money has to be used for education. When the minor reaches 18 on an UTMA account, the child can do whatever they want with the money. As a side note, I usually recommend never telling the kids that the UTMA accounts exist to get around this.
Picking an index fund has it place. Basically it is the conservative play. I use index funds when a client is a 5 on a 1-10 scale regarding risk.
My standard advice for any college savings plan using dollar cost averaging is to pick a good small cap mutual fund and stick with it, especially if they are starting to save while the child is very young. Once the child is getting closer to using the money, I recommend moving the money to a more stable investment. I re-evaluate mutual funds about every two years. In my opinion, any shorter time frame is not fair to the fund managers.
In regards to 529's, I personally don't recommend them. It's too early to have any return figures to compare. The biggest upside to a 529 account is that the money has to be used for education. When the minor reaches 18 on an UTMA account, the child can do whatever they want with the money. As a side note, I usually recommend never telling the kids that the UTMA accounts exist to get around this.
Another big difference between the two is how what you can invest in. Generally, with 529 plans you are limited to mutual funds managed by whomever you do the plan with (i.e. Vanguard, Morgan Stanley, Van Kampen, etc.).
With an UTMA or UGMA, you can generally buy any type of security you want (stocks, bonds, any mutual fund, etc.).
Also as stated earlier, as it stands now, investments in 529 plans grow tax free. However in UTMAs, income from dividends and capital gains are taxed at the child's tax rate, provided enough income is earned by the child to require taxes are paid.
With an UTMA or UGMA, you can generally buy any type of security you want (stocks, bonds, any mutual fund, etc.).
Also as stated earlier, as it stands now, investments in 529 plans grow tax free. However in UTMAs, income from dividends and capital gains are taxed at the child's tax rate, provided enough income is earned by the child to require taxes are paid.
RoundRobin
100+ Posts
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