Stock Market & 529 plans

[Thrif-t]

So I have to admit I'm getting a little nervous about world events. I've never changed the investment options in my 529 and I want to get your opinion if you think I should now. You can do this twice a year. 3 funds all invested in Vanguard Aged Based Portfolios. I have 2 in college now, one a sophomore, the other a senior (who is doing a co-op so won't graduate until 5/19) and a high school junior.

I really don't want to lose any money out of their funds. I guess I am ok with not making any more for the 2 in college, but I absolutely don't want to lose anything at this stage of the game.

I went online to see what funds they are invested in and the College kids funds are invested as follows:

VANGUARD INCOME PORTFOLIO (INVESTMENT-GRADE INTERMEDIATE-TERM BOND)

Vanguard Total Bond Market II Index Fund..........................34.5% Vanguard Total International Bond Index Fund ...................22.5% Vanguard Short-Term Inflation-Protected Securities Index Fund..18% Vanguard Federal Money Market Fund ..................................25%

While the high schooler is in:
VANGUARD CONSERVATIVE GROWTH INDEX PORTFOLIO (STOCKS AND BONDS)

Vanguard Total Bond Market II Index Fund..........................52.5% Vanguard Total International Bond Index Fund ...................22.5% Vanguard Institutional Total Stock Market Index Fund...........15% Vanguard Total International Stock Index Fund ......................10%

I've been toying with just moving the balances in a cash fdic insured fund, but I'm not really sure if I should or just stay the course. I think the kids in college funds is fine, right, don't stocks and bonds usually move in different directions?

Would like others opinions. Thanks

[kork13]

First and foremost, any investment change you make must stay WITHIN the 529 plan. Otherwise, you'll be hit with penalty charges and stuff you don't want to deal with.

Second, I don't think that such a thing as a "cash fdic insured fund" exists... Those are called "savings accounts", which to my understanding are not available within 529 plans.

Finally.... What exactly is your concern? That the stock market is going to implode? That the bond market will do the same? Both of those? Understanding your fears will make dealing with them much easier. But for what it's worth, I think they're all invested very appropriately. The in-college kids' 529's are in an income fund that's allocated in very safe positions. While some losses are possible, they should be very minor -- at worst, perhaps 3-5%. That's how bonds work, though you also have a healthy cash allocation (25%) with the money market fund, which will steady out any losses as well. Similarly, the high schooler's 529 has minimal stock market exposure (just 25%), so even if the stock market tanks, the overall 529 value wouldn't likely drop more than 5-8%. This 529 also has a solid bond holding, which will stabilize any sudden shifts in the stock market. But if you're really concerned, you can elect to move the high schooler into the Income portfolio along with the other two. It'll just constrain the growth potential in these last few years before the money is needed.

[disneysteve]

I think they're all invested very appropriately

But if you're really concerned, you can elect to move the high schooler into the Income portfolio along with the other two.

I agree with both points.

[Thrif-t]

Thanks Kork, that made me feel better! Yes I know to keep the money in the 529 plan, there are lots of options that you can move the money to inside the plan. They have CD funds and stable cash funds and one is FDIC insured, I'm in the Ohio 529.

I just wanted reassurance that we wouldn't experience catastrophic losses if things start going down hill with the stock market. It's rather late in the game to be able to make up any big dips this close to the finish line.

And I think I need to stop reading about this stand off with N. Korea, very unstable situation and makes me a tad nervous is all

[disneysteve]

I just wanted reassurance that we wouldn't experience catastrophic losses if things start going down hill with the stock market.

The one fund is 25% stock.
Let's say you have 50K in the account.
That means $12,500 is in stocks.
If the market drops 20%, that's a $2,500 loss. Not great but not catastrophic either. And that assumes the entire world market drops 20%.