Turn Tame When the Time Is Right to Use Your College Savings

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Turn Tame When the Time Is Right to Use Your College Savings

If your college savings portfolio tanks in the fall of freshman year, you won’t have the luxury of waiting for it to rebound. That’s why a college portfolio should become tamer as the student gets closer to matriculating. The idea is to protect the gains instead of angling for more.

To rein in the portfolio, you could shift assets into a short-term bond fund. If the markets turn ugly, the bond fund won’t lose much—if any at all.

The seven-year itch

Start moving some of the portfolio’s assets seven years before you need to make that first tuition payment. That should cushion you against a prolonged market slump. In fact, at that seven-year point, your child’s college education isn’t a long-term goal; it’s an intermediate-term goal. As such, the portfolio should begin to look more like an intermediate-term portfolio than a long-term portfolio.