But what if you were planning on using your child's 529 Plan to pay for college this year and/or next?  What if your Holding Period were only a year or two?  The chart above-right paints a different story, one that Wall St. fails to disclose.  The variance if the holding period were one year is +60% to -40%.  Can you afford to potentially throw away 40% of your college savings, in one year?  Is the opportunity to potentially get 60% (and when was the last time anyone earned 60% on their mutual fund portfolio?) worth the risk?  The yellow line, by the way, is Wall Street's "Age-Based Portfolio" solution: bonds ( where your historical annual risk is 18% of your principal).

TO SUMMARIZE, if you are the parent of a recent high school graduate, a Senior or a Junior, you should NOT have all of the money you're counting on to pay for college in 529 Plans.

The Risk-Reward ratio is simply not there.  Sure, you could get lucky and have your portfolio increase 20%+ in the one or two years that remain until college.  But is "luck" a college financial planning solution? 

1. Aged-Based Portfolios do not mitigate risk since they invest in bonds that are at record highs. 
2. 529 Performance for the last five years has been, for the most part, abysmal.  529 Plans entail 100% principal risk. 
3. America's most popular 529 Plan includes a 5.75% load charge, meaning you start each year DOWN 6%. 
4. 529 Plan withdrawals are NOT always tax-free, even if used for college. 
5. 529 Plans ALWAYS count against families for financial aid (even merit), potentially costing up to 6% in principal.
6. 529 plans come loaded with fees to multiple entities. 
7. In short, 529 Plans entail a lot more Hype than Help. 

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529 Holding Period Risk

What if Time were NOT on Your Side?
Concept Three:  "Holding Period Risk"
The Chart at left below is probably similar to one that your friendly investment advisor has shown you. 
It highlights how, over 15-year rolling time horizons (through 2008), the S&P 500 Index has never declined.
Indeed, if you had 15 years or more to a need for cash, you'd have seen a 15-year-return between 5% and 19%.
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