thanks bill, i'm still weighting things out. yes, i did see your url
for the slate article. very helpful. i'm just having a hard time
comparing the funds held by a certain iowa 529 plan.

cporro wrote:
- quote -

In case you missed it in my other post (though I think you were on that
thread), here's the link to a Slate article about the "529 rip off".
Bear in mind, the article is almost 4 years old.

http://www.slate.com/?id=2070062

- quote -

It's actually less than this because you aren't required to realize the
capital gains every year. Though the fund may internally generate
capital gains via turnover which it passes on to you. But since you're
specifically talking index funds, I should mention that index funds
have very low turnover and, hence, generate very little capital gains.
That being said, you do have to pay taxes on dividends on an annual
basis.

- quote -

Because capital gains are deferred until you sell, the effect of taxes
your rate of return also depends on how long you stay in the fund. So
a 1-year scenario isn't very telling. The Slate article cites
management fees and loads as the main reason these funds can be a
ripoff.

--Bill

i wanted to work through the math myself. i'm no mathematician or savvy
investor but from what i concluded there is no point in me using a 529.
here is the short of it.

i tried to calculate your expense on a yearly basis. i realize i'm
leaving out some details but i think i got the big cost items.

i'm making the estimate that the 529 and brokerage both get an 8%
yearly return. in reality i've yet to see a 529 that can compete with
the vanguard 500 index. some 529's have a portion (60% ) in an index
fund that tracks the s&p 500.

for a brokerage with a vanguard s&p 500 index fund:
expense ratio: .18
capital gains (20%?) as a percentage expense: .08 anual return (.08 *
.2) = .016
total (rough) expense per year .18 + .016 = .196

for the iowa 529:
expense ratio .65
no capital gains tax
total (rough) expense per year = .65

ok, so you have 2 vary different yearly expenses. needless to say, the
brokerage with a vanguard S&P index kills the 529 right out of the gate
and continues to do so. not to mention in 2011 the law might be changed
on the 529 (may tax withdrawals), you need to use it for qualified
expenses or get hit with a big slap, and your investment options are
limited.

is my math wrong? i'm i basically sound?
if i'm right, why does fool.com even mention them?

please unconfuse me. thanks