An increasing number of states allow their residents (and nonresidents, in some cases) to choose from an extensive menu of individual mutual funds in their 529 plans. Such choices may make sense if you’re working with a professional advisor who can help you pick funds. Alternatively, some individual investors are knowledgeable enough to select the right individual funds on their own, without a financial advisor.
You may be reluctant to make those choices, though, especially when college funds are at stake. If so, you can choose age-based accounts in many 529 plans. Such accounts generally use fairly aggressive techniques for young children, becoming more conservative as those students near college age.
With an age-based account, teams of investment technicians will be designing your college savings portfolio. These MBAs and CFAs (chartered financial analysts) will apply computer-driven algorithms based on modern portfolio theory to make sure that your 529 account is properly balanced and diversified. By knowing the ages of your children, they can pick the investments most likely to build the college fund you’ll eventually need.