Ready-Made Portfolios

Ready-made portfolios are an option for employing asset allocation strategies without doing the allocating yourself. Balanced funds typically offer a combination of stock and bond holding, while “life cycle,” or “age-based,” funds employ a combination of stock, bond and cash holdings that are automatically rebalanced over time to meet the asset allocation needs of the beneficiary based on his or her age.

Ready-made portfolios can help overcome one big obstacle to developing a long-term investment program: overwhelming choice. Studies have found investors can be so intimidated by the many mutual fund choices available that they put off investing entirely. Or they spread assets across numerous funds, which can raise the complexity of managing their portfolio.

Balanced funds
Balanced funds, by combining stock and bond asset classes in a single package, can be a sound alternative to selecting individual options. In CollegeAdvantage, there are four balanced options to choose from, each employing a different combination of stock and bond holdings, each with its own unique investment objective.

Age-based funds
Age-based portfolios, which are popular in 529 plans, are another option for employing asset allocation strategies without doing the allocating yourself. They are ideal for those who don't want to manage individual investment options.

Age-based funds are diversified pre-mixed portfolios, which automatically reallocate assets over time based on the age of the beneficiary. For younger beneficiaries, assets are invested in portfolios composed primarily of stocks, which offer the greatest growth potential over time but also carry the greatest near-term risk. As the beneficiary ages, assets are automatically shifted to portfolios with more bonds and short-term investments, which offer lower potential returns in exchange for reduced risk. This enables you to protect capital and reduce market risk before you begin making withdrawals for college.

CollegeAdvantage has four ready-made age-based options that automatically adjust allocations over time. The Vanguard CollegeAdvantage age-based options have three risk profiles: conservative, moderate and aggressive.

The Advantage Age-Based Option is actively-managed, with four underlying portfolios comprised of 13 underlying CollegeAdvantage investment options. Asset allocation is based on the age of the child.

The three Vanguard age-based options are passively-managed index options with five underlying mutual funds and have an asset allocation based on five age ranges.

Age-based college saving options are ideal for parents who appreciate a properly diversified, professionally-managed college savings portfolio–but don’t have the time to build and manage it themselves.

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