mindless college investing

if you are blessed with small children and in a position to help them with college costs, i can offer a li'l friendly investment advice based on my experiences this year: you might consider taking the age-based college savings option.

years ago, we put some money into two 529 plans for the kids -- not much, but enough to get them through at least the first year or two in a school like the minnversity. the age-based plan gradually shifts the funds from a riskier equity portfolio at age 0-3 (shown above) to a less risky bond and money market portfolio at age 15-17 (shown below).

with tor graduating next year (fingers crossed), his college fund could have been decimated by the sudden recent drop of 40 to 50 percent in the major stock market indices. instead, his portfolio is only down about 11 percent year to date. that's still worse than sticking the money under a mattress, of course, but far better than the 30 percent loss he'd have taken if we stuck with the age 0-3 allocation. we opted for a different state plan with esperanza, but took the same age-graded option.

as a general rule, my investments tend to do better when set on auto-pilot than when i try to manage them actively. when i signed up for these funds, i remember thinking that age-based plans were mindless and that a smart money manager could probably outperform them. fortunately, i knew that i was not a smart money manager and that, nine times out of ten, mindlessness will outperform ignorance, laziness, and procrastination.

here's a final bit of middle-age-guy advice to parents with preschoolers: the 2008 downmarket period seems like an ideal time to scrape together a couple hundred bucks to start those college savings plans. 2025 will be here before you know it...