Expert: Paul Henneman - 1/19/2008

Question
I currently live in NC and have three 529 College Savings accounts for my three boys--ages 3, 5, and 9.  I have chosen the aggressive (age-based)inestment option--which I understand to mean that my money is invested in stocks.  It is "age-based" because as my children age, the way the money is invested changes.  As they get close to college age, the money will be put in mutual funds or bonds--something more "safe".  This is how I understand it to be.  My question to you is should I change my investment option to a less aggressive one, given the current state of the market.  And given the fact that this down turn is expected to last several more years.

Answer
Nikki,
   Thank you for your question!
The simple answer is no, you should not change your investment profile due to current market conditions.
   The problem is that the market has already corrected a great deal. The stock market is generally forward thinking, meaning that if the economy is in recession, and will be so for the next year, that is factored into the market sooner rather than later.
  Additionally, no one can say for sure. Don't believe the hype! Just a few months ago the 'experts' were saying that the economy was strong, and the markets were in good shape. And here we are with a major correction.
   My fear would be that if you changed to a conservative profile now, if and when the markets do turn around you will see much less upside to make up for the recent downturns.
   Of course only you can say for sure. But if you want a more aggressive stance it will yield better results in the end, but only if you stick to it. On the other hand, if you would sleep better at night, and have re-evaluated yourself as a more conservative investor, then by all means change your profile. I only encourage you to determine what type of investor you are, then stick by that profile. By definition more aggressive means more ups and downs, but over the years it also means generally higher overall returns.

I hope that this helps, please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
valuEnigne Inc
www.ValuEngine.com