The "fund" you may be interested in is the 529 College Fund. If you open an
Approved 529 College Fund, there is no year-to-year tax on dividends. Taxes
are paid as monies are withdrawn. More information is available from a
variety of Investment Brokers. According to FIDELITY, every state has an
approved Fund. The info below is from FIDELITY INVESTMENTS-




What is a 529 Plan?

529 Plans are a federal tax-advantaged way to save for college. The plans
are maintained under Section 529 of the Internal Revenue Code. 529 Plans are
offered through the states, and every state offers at least one plan.

Residents of any state can invest in any state's 529 Plan, you do not have
to be a resident of a particular state to invest in that state's plan.2

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How are the various 529 Plans offered by the states similar?

Although each state determines particular plan features, like contribution
maximums, there are some similarities. The following features are common to
all 529 plans:

.. Tax-deferred growth of investment earnings (meaning you don't have to
pay taxes annually on investment growth, taxes are paid when distributions
are taken).
.. Federal income tax-free qualified distributions3
.. No restrictions based on income.
.. Money can be used to pay for tuition, and most plans cover books, room
and board and other qualified higher education expenses.
.. Does not have to be used at a state school. Money can pay for most
accredited colleges and universities nationwide.
.. Gift and estate tax benefits for contributors to the accounts.
.. Parent (participant) maintains control over account assets, not the
beneficiary (child).


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How do 529 Plans vary?

The following features can vary between state 529 plans. Compare these
factors when looking at different plans:

.. Portfolio management - what financial services company is managing the
plan?
.. performance
.. Number of investing options
.. Contribution cap for the account (this is defined by the states)
.. Fees for the account
.. In-state tax treatments, such as state tax deductions
.. Special programs or benefits, such as a rewards credit card, or other
accelerator contribution program


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Which 529 plans does Fidelity manage and what is the difference between
them?

Fidelity manages three state-sponsored 529 plans. You do not have to be a
resident of one of the states to invest. The plans share virtually identical
features and management philosophies. There are slight differences between
the underlying funds and asset allocation percentages of the portfolios.

The plans are:

.. The UNIQUE College Investing Plan offered by the state of New Hampshire.
.. The U.Fund College Investing Plan offered by the Massachusetts
Educational Finance Authority.
.. The Delaware College Investment Plan offered by the state of Delaware.


Fidelity offers the New Hampshire UNIQUE College Investing Plan as its
national plan, and may be an attractive alternative for residents of any
state except Massachusetts and Delaware.

If you are not a New Hampshire, Massachusetts, or Delaware resident, you may
want to investigate whether your state offers its residents a plan with
alternate tax advantages.

Source:
http://personal.fidelity.com/global/...quser=college+
funds

--
KB
http://pages.prodigy.com/wealth
Finance and Investment For Beginning Investors

"Change is the law of life,
and those who look only to the past and present
are certain to miss the future."


"Ronald" <esther8850[at]hotmail.com> wrote in message
news:b61a9ec1.0404090802.3d08f45b[at]posting.google.com...
- quote -

I would like to open a college fund for my grandchild that invests the
money in stocks and bonds. If a stock rises and the fund sells it and
reinvest in other stocks, is it taxable. Is there a limit each year
on how much profit the fund can earn without being taxed. Is there a
particular type of fund to establish to keep all income in this
college fund.