Help me choose the right 529 option.
September 20, 2014 7:24 AM   Subscribe

My baby girl was born in May and I'm setting up a 529 for her. I've decided to go with one of the age-based options under the Utah 529 plan, but I can't decide between the domestic aggressive option or the global aggressive option.

Or am I crazy for going with the aggressive option in the first place and should choose moderate instead?

We have a financial advisor who could get us in a broker-managed fund, where I wouldn't have to figure this all out. But I'm also trying to avoid the high fees that come with those.

Any advice?
posted by missjenny to Work & Money (3 answers total) 2 users marked this as a favorite
The answer depends on your tolerance for risk and, just as important, how this fits into your entire portfolio (is it a tax-advantaged adjunct to other savings, or is it your primary vehicle for college savings - in other words, how badly do you need this money?) If your financial advisor will only get you into a broker-managed fund, then he/she is a salesman, not an advisor. Find a fee-for-service financial advisor for this, and have them review your other investments while you're at it.
posted by mr vino at 8:27 AM on September 20, 2014

You've got 18 years, which is a long time horizon. Go aggressive. Global v domestic: it's a bet. I know my peeps (I'm the tax guy in a wealth management firm) think global is the way to go, but IMHO domestic already has lots of global exposure.
posted by jpe at 11:45 AM on September 20, 2014

Best answer: Go easy on yourself, you're doing great. Having a 529 plan at all puts you way ahead of the curve, and IMHO the Utah choices are excellent. Both options you're considering are low-fee (about 0.2%), which is by far the most important thing you can do to maximize return. Avoid the broker-managed fund.

The real difference between the two funds you're asking about is whether the equity portion is 100% US or else 70% US / 30% global. According to the program description, the global option is a mix of two Vanguard funds VPIDX and VEMRX (developed and emerging markets). This is a very normal way to add international equity exposure to an American portfolio. Even a US-only portfolio has significant foreign exposure; American companies rely on non-US suppliers and consumers. The global fund gives you more.

If I read the info correctly the global option does include some currency risk. If the dollar gets stronger you will lose some value, and if it weakens you will gain. There's an argument that if you're saving for a US Dollar expense in the future you should invest that money in US Dollars, just to make it more predictable, but I'm not sure that really applies to such a broad category investment.

I think the bigger choice you're making is aggressive vs. moderate or conservative. This choice really comes down to your ability to take the risk vs. your hope to maximize return. That's a broader investment question than you've asked so I won't go on at length here.

(I am not an investment advisor and am not qualified to give professional financial advice. FWIW, I have money invested in the Utah Age-Based Aggressive Global funds. I decided it was a good choice for me, but have no idea if that's a good choice for you.)
posted by Nelson at 12:03 PM on September 20, 2014

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