"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<0c56vvgnu81ap47pgaul0nq2mfu973tupo[at]4ax.com> ...
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and Vanguard accounts as their best plans. I think they base their
decisions on costs only. While costs are obviously a concern because
they directly impact peformance, they are not the be all and end all.
To me performance is what counts.

I have two kids and invest one's 529 in a Alaska TRowe Price, and the
other in Fidelity's Delaware. My six year old starts in 2012, and my
3 year old starts in 2015. Using the performance data at Saving for
College website, I compared the most recent YTD performance data for
these four plans.

Fidelity TR Price TIAA
2015 26.76 23.61 19.79
2012 21.42 22.07 16.97

Clearly, TIAA CREF underperforms significantly, despite its lower
costs. By the way, on costs, TR Price is about 1% of assets, and
Fidelity averages out to about .86%, all pretty reasonable in my
estimation.

Vanguard is a little tougher to compare because their age-based
portfolios are categorized as 0-10 years old. So they invest the same
for a 10 year old who is 8 years away from college, as they do a
newborn is 18 years away from college. This seems a little risky to
me. Vanguard's performance for this portfoloio was 22.57,
underperforming my 3 year old's Fidelity account, and only slightly
outperforming my 6 year old's Fidelity account.

Other concerns about TIAA and Vanguard's portfolios. TIAA has a
relatively high concentration in bonds. That is not where I would
want to be in this low-interest rate environment. Rising interest
rates will result in lower bond returns and perhaps even losses.

Also I believe the Vanguard portfolio is mostly, if not exclusively
index-based funds. While that seems to work best for large cap S&P
500 investing, my experience is that good midcap, smallcap and foreign
funds consistently blow away their benchmarks because those markets
are not as efficient--these companies are not as widely followed by
the investors and therefore there is a greater chance to find stocks
that are undervalued.

Don't get me wrong, I love Vanguard funds because of their low fees.
In fact, I have Education Savings Accounts for both boys in Vanguard
balanced funds, Star and Wellington.

Another benefit of the Fidelity account is the MBNA Mastercard program
it offers. They deposit 2% of every purchase into your 529 program.
I use it for all my business travel. From March to December 2003, I
earned over $750 in contributions. I also made $230 this year from
Upromise. I highly recommend that people planning for a kids
education check out both of these programs.

I have also found the Money magazine's website college planning
calculator to be very useful, at money.com, because you can figure out
what rate of return you need to achieve to fully-finance your kids'
education, based upon your current savings rate. According to this
website, based on my current savings rates, I only need a rate of
return of 5% to fully finance my kid's education at a NJ public
college--it was good enough for the old man, it's good enough for
them! A 4% return will only leave me about $10,000 short. This
information makes me very confident that I will be able to finance
both boys educations pretty easily. Unless they get accepted to
Harvard, Yale or Princeton. For that, I'll be willing to pay for a
private school education because I think the potential benefit is
worth the added cost.

On Mon, 29 Dec 2003 15:55:52 CST, Klein <QZISQIBJCIYO[at]spammotel.comwrote:

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While every resource can add something, the above web site is an
example of the problems with using only one resource.

Take my State (SC) as a case in point. Our 529 did not make the honor
roll. It is no-load for residents. As for investments, there are
several. My favorite is a large cap fund (essentially tracks SP500)
with a total expense ratio of 45 basis points. It also has a stable
value fund yielding north of 4%.

While I am a fan of both TIAA-CREF and Vanguard, couple our 529's
index fund expenses with a state income tax deduction for resident's
contributions and you have got a heck of a deal. Yet the SC plan is
not mentioned on the "honor roll".

-HW "Skip" Weldon
Columbia, SC

http://clarkhoward.com/library/tips/529plans.html

This is an independent resource that lists an "honor roll" of a
handful of state plans and other useful info. One surprise ...
the list of "honor roll" plans is surprisingly short - some
state plans are stingy.