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#7054 - 06/21/01 05:01 PM plunking down a large amount at once
KS225 KS225 Registered: 06/08/01 Posts: 47	So a parent or grandparent has a bucket of money to fund a child/grandchild's 529. (Up to 50K due to the deferral of gift taxes.) How risky is this to do all at once? Is there a way to dollar cost average?
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#7055 - 06/21/01 07:19 PM Re: plunking down a large amount at once
Drew Drew Registered: 01/09/00 Posts: 2478	One of the major benefits of $50K rule is that you can front end load your plan, so to max it up makes sense if you can afford it. There are two ways to "average" out an account. 1. spread out your purchases over the year but be sure to get them in the right year for the 50K rule to work best. 2. buy several different state plans all for the same beneficary. Its the grand total $ that counts not the amountper plan that applies to the 50K rule. _________________________ Drew
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#7056 - 06/25/01 02:51 PM Re: plunking down a large amount at once
Joel Joel Registered: 06/13/01 Posts: 104	KS225, You need to further define one word in your post "risky". If you feel the market will continue to drop for the remainder of the year, maybe do as Drew says. But let me ask, what if the market begins to move up in the next quarter? would you still want to DCA? It is not the timing of your investments that creates wealth, it is the "time" in the market that does it. How much time do you have and will today's market really make any difference? _________________________ Joel Beck Wachovia Securities, Inc 800 283-3246 jbeck@wachoviasec.com
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#7057 - 06/25/01 03:27 PM Re: plunking down a large amount at once
KS225 KS225 Registered: 06/08/01 Posts: 47	Joel, Timing the market is always tricky. Who's to say that there will not be another drop of 10-20% (or more)? Then you have to make that up just to break even. Kids are 7 and 9 yrs old. Ken
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#7058 - 06/25/01 03:56 PM Re: plunking down a large amount at once
Drew Drew Registered: 01/09/00 Posts: 2478	KS225 You cannot have it both ways. There is sufficient room in the rules for you to "average" if that's your choice. The market is about choices. The only negative feature about 529's in this contect is that a loss is of no tax benefit. But then only the averages count at the end. If you really want to be conservative you can put your cash into conservative 529s or even Series EE or I bonds and move them over only when you feel the time is right. (Watch the gift tax issues if you move Bonds to 529's) Or you can buy guaranteed return 529s such as PA offers _________________________ Drew
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#7059 - 06/26/01 12:41 PM Re: plunking down a large amount at once
Joel Joel Registered: 06/13/01 Posts: 104	KS225, You missed my point. First of all, there is no such thing as TIMING the market, at least not in my world. I was trying to emphasis that the TIME your money stays invested is more important than any TIMING discussion (which as I say does not exist). In both your kids cases, they have 10+ years before the accounts will be empty. This is enough to consider the historic averages for an equity investment. If there is a drop of 10% or more, consider adding more money to the account. You are investing in equities, they WILL be volitile. The volatility is the price you pay for the future return. You need to assess your own feelings regarding this investment in your childs education. If you are going to make changes (sell) when the market goes down, you will be doing a disservice to your investment and kids. It's only human to feel concerned about your investments, and not want to see dips in the market. Just don't act on your feelings and your account will grow. _________________________ Joel Beck Wachovia Securities, Inc 800 283-3246 jbeck@wachoviasec.com
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#7060 - 06/26/01 02:43 PM Re: plunking down a large amount at once
KS225 KS225 Registered: 06/08/01 Posts: 47	Thanks for the clarification and explanation.
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#7061 - 06/26/01 04:05 PM Re: plunking down a large amount at once
Drew Drew Registered: 01/09/00 Posts: 2478	If you pick one of the EE bonds, I bonds or a conservative investment inside an eduIRA or any one of the conservative 529's which have a guaranteed return or are guaranteed to match cost of education inflation by virtue of being a prepaid program you have de facto limited your down side. (In fact the whole original point of 529s was to guarantee a rate egual to education cost infrlation--which is sort of what you want to insure in the first place--look at it as an education insurance policy not an investment plan. PS The prepaid and guaranteed plans tend to jump up a tad with each year so be sure to buy them before they jump up--its a cheap form of timeing! _________________________ Drew
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