Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 39

You'll face a different set of considerations with mid-term financial goals. College is one of the most interesting investment planning issues because of the special considerations involved. We can all hope that our children will receive full or partial scholarships, or generous financial aid. But, realistically, most of us need to plan on paying for college either out of savings or with loans. And it makes more financial sense to be able to pay for it out of savings than for either you or your child to take on considerable debt. Start saving early, and time can help you foot the bill. College will be a more manageable expense if you finance it with savings that have compounded over the years (particularly if they compounded in a tax-advantaged account) than if you take on debt and pay off the loans and interest with out-of-pocket money. When you save, compounding works for you. When you borrow, it works for the lender.

Your college savings bucket will require more active monitoring and management than the others for two reasons. First, you can already figure out when you're going to need the money and roughly how much you may need. If your child is 5, it's reasonable to assume that college bills will start arriving in 13 or 14 years. You can look at tuition data now and forecast what your costs could be for a private or public college. Tuition data are available from a number of sources, including the College Board's website (www.collegeboard.org). Given this information, you'll want to keep an eye on your college-savings bucket as time goes by to make sure it is moving you toward your goal. You may have to increase your savings, for instance, if you determine you are falling short.

The second reason for actively monitoring your progress in saving for college is the relatively short time frame. Suppose you begin saving on the day your child is born. You'll probably want to start out with stocks because they are likely to offer more growth. But that growth offered by stocks is accompanied by considerable ups and downs over the short term, and you don't want to have to start using those funds for tuition during a prolonged down period. So, as your child enters her teens and college approaches, it may be prudent to shift into more conservative investments, such as a money market fund and a short-term bond fund, that emphasize preservation of capital while paying some level of income. My colleague Glenn learned this lesson the hard way when one of his children reached college age during the 2008–2009 market drop, and he had failed to adjust the child's college portfolios to a more conservative stance. It pays to pay attention.

Note that many 529 plans, discussed in more detail in the accompanying Baseline Basics, offer age-based or target enrollment portfolios. You simply select the portfolio that matches your child's current age or expected matriculation date. The portfolios are diversified among stock, bond, and cash investments; the allocation then automatically and gradually adjusts over time to a more conservative mix as your child approaches the first day of college.