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‘Tis the season for giving.

Find out how to give the gift of education to someone you love.


Investing Basics


Is a 529 Plan:  A 529 plan is an education savings plan operated by a state or an educational institution and designed to help families set aside funds for college. It is named after Section 529 of the internal revenue code, which authorized these types of tax-advantaged savings plans in 1996. Earnings on 529 plans are tax-free if used for qualified higher education expenses. (Unqualified withdrawals may be taxable as ordinary income and subject to a 10% federal tax penalty.) The Pension Protection Act of 2006 made the tax-free character of 529s a permanent part of federal law. your first time investing? If so, it will be helpful for you to understand some investing basics so you’re better informed when it comes time to make important investment decisions. We invite you to read more about:

Balancing Risks & Rewards

Everyone wants to earn a profit on their investments. But achieving a higher rate of return often means taking on more risk.

Of the three primary asset classes — equity, fixed income and credit, and stable value — stable value investment poses the least risk. In comparison, investment in fixed income and credit is considered moderate risk, and investment in equity carries the greatest risk for investors. Not surprisingly, stable value investments generally offer the least amount of profit and equities have the potential for the greatest return.

So, how does one balance risk and reward? In order to determine your comfort level on the risk/return spectrum you have to ask yourself some important questions. What is your time horizon? What tradeoffs are you willing to make to try to maximize returns? What is your investment priority: increasing returns, reducing risk or a combination of both?

Allocating Your Assets

There is no way to predict how well the markets or particular investment options will perform over time.

Diversifying your assets, or spreading them around to different investments, stocks, bonds and stable value, is a useful strategy as it allows you to greatly reduce your portfolio’s exposure to any one type of asset class.

Overall, a diversified portfolio is less risky because even if some of your holdings go down, others may go up.

In 529 plans, many invest in age-based portfolios to start out with an “aggressive” portfolio (with more equity funds) and later shift toward “conservative” investments like fixed income funds, which seek income and principal protection as the beneficiary nears college age.

INVESTMENT STRATEGIES

Investments from Industry Leaders

Saving for qualified education costs often means selecting investments— a task that can seem overwhelming. However, the Texas College Savings Plan helps by offering three investment options— Age-based, Risk-based and Individual Asset Class—tailored to different growth requirements, situations and risk tolerances. Portfolios include different investment allocation strategies from industry leaders DFA, Eaton Vance, Federated Hermes, Vanguard and New York Life.

Age-based option

Your savings are placed in a portfolio matched to your Beneficiary:  The individual identified by the Account Owner whose Qualified Higher Education Expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose Qualified Higher Education Expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.
age. The Plan will automatically move your savings into the next Age-based portfolio as your beneficiary gets older. When your beneficiary is younger, the portfolio will be weighted more heavily in equity investments. As your beneficiary approaches college age, the portfolio will be weighted more heavily in fixed income and stable value investments.

Risk-based & Individual Asset Class options

If you choose a Risk-based or Individual Asset Class portfolio, your investment does not change with the age of the Beneficiary:  The individual identified by the Account Owner whose Qualified Higher Education Expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose Qualified Higher Education Expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.
. Each of our Risk-based portfolios offers a group of investments that, together, target a specific risk profile. The Individual Asset Class portfolios focus on a single type, or class, of investment and allow you to design your own Asset Allocation:  A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market. . Your investment will remain in the portfolio(s) you select until you instruct the Plan to move to another portfolio.