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A 529 plan is a way to save money for college that can net you some tax breaks. Many people are worried about investing because of the recent volatility in the market. If you already have a 529 plan, you may be concerned about your balance falling with the market. You may take this time to decide under the advice of a financial advisor if you are in the process of saving, if you are more comfortable investing in more stable entities or if you are comfortable with volatility over the long term. are ok
Some people may have been advised to invest in riskier stocks because they’ve had plenty of time to save for college. If you have a high risk tolerance, this isn’t necessarily bad advice. If it bothers you to watch your balance rise and fall dramatically, you may choose to invest in something more stable, such as mutual funds invested in stocks and bonds. This is the area of investing that many long term investors end up in.
Not many people are willing to watch their investments fall with the market. Some people may have liked to be more daring before 2000, but maybe not so much now. With more than 100% returns, many people were blindly investing money in risky investments. You have to look at the long term results and understand that these results are achieved by the fund managers over a period of time. There could be some big ups and downs during the years you’re looking at. Mutual funds with stocks and bonds give you some risk so there is potential for faster growth than bond funds, but that doesn’t mean there will be higher growth than bond funds.
If you’re getting close to needing the money in a 529 plan, you can be even more conservative and stick to mutual funds invested in bonds. Bonds may also be backed by the government. Since the government has the power to levy taxes, the chances of government bonds losing money are very small. These types of funds can be quite stable.
Bond funds offer dividend payments that can be reinvested in your plan. Depending on your tolerance and your time frame, this may or may not be the best thing for you. Generally speaking, if you have several years to save, some risk is usually bearable because you have time to wait for market bottoms. The ups and downs can be worth it and can sometimes actually pay off if you have the stomach for your money to rise and fall constantly.
Talk to a financial advisor about assessing your risk tolerance before deciding where to invest your money. A 529 plan is a great way to save money and get some tax breaks. If there is a loss of money in your plan, you can also get a tax exemption by deducting the loss of principal amount from your income. These benefits are combined with scholarships, grants, student loans and private student loans Can help you get your child into college.
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