Investing in 529 Plans During Market Turmoil
My daughter just turned 2, and I started investing in her 529 plan when she was about 3 months old. Needless to say, the account isn’t worth as much as I’ve put into it.
No one is happy about the global stock market crash. But that doesn’t mean you should stop contributing to 529 plans. Think about it this way. You may have “bought” the stock market at 14,000, and 13,000 and 12,000 and 11,000. Now that it’s cheaper, should you stop buying it? One of the nice things about 529 plans is they let you set up a regularly monthly contribution. If you stick to your plan, that means you buy into the market every month. This allows you to dollar cost average your investments.
Although my time horizon is long, you need to evaluate your strategy if your kid is going to college soon. Many 529 plans offer time horizon funds which automatically switch some of your money into bonds and less risky investments when your kid gets closer to college. That way a sudden crash in the market, like what we’ve seen lately, won’t keep you from being able to pay for college.
Unless you think the market will continue on a downward trajectory from now until when your kid goes to college, it probably makes sense to stick to your plan and keep investing on a regular basis.