Experts suggest choosing more aggressive
investments, such as
stocks and stock
mutual funds,
while your
child is young, since
equities
have the potential to give a big boost to your portfolio when
the stock market is strong.
s
If some of your stocks increase sharply in
price, you may want to sell to lock in your gains. And if stock
prices falter for a time, you can wait out the downturn. On the
bright side, if you’re adding money to stock mutual funds
on a regular schedule, you’ll be buying more shares for your
money when the price is depressed.
A conservative shift
As your child approaches college age, experts
suggest shifting the majority of your assets gradually into investments
such as
Treasury bills
and
certificates of deposit (CDs).
Insured
and short-term investments change very little in value, so you
can be confident that your accounts won’t lose value. Even
then, you may want to leave at least part of your investment in
stocks and stock funds for their growth potential.
Zero coupon bonds
You may also want to consider
zero coupon
bonds
whose maturity dates correspond with some or all of the
dates that tuition bills will be due. You buy zero coupons at
much less than par value, and the interest accumulates during
the term. If you buy municipal zeros for a taxable account, the
interest is tax free.
