The bear market of 2008 has destroyed the college savings accounts. Not only have all the gains from 2006 and 2007 been eliminated, the losses have also reduced the principal from the contributions. Here are the results as of 11/5/08:
|YTD 11/5/08||Loss since 2005|
|Vanguard Aggressive Growth Index Portfolio|
|Vanguard 500 Index|
|Vanguard Extended Market Index|
|Vanguard Developed Markets International Stock Index|
Until doing this analysis, I didn't realize we had lost almost 29% of our contributions. It's a good thing we don't need the money for another 14 years. Hopefully, the market will recover by then :-) Seriously, this bear market has clarified my future investment strategy for college funds. I will definitely move a significant portion to interest bearing accounts within 2-4 years of needing the money for college.
In the meantime, we will continue to make the maximum state tax deductible contribution for 2009. However, this time we will stagger the contributions over several months, in case the market continues to decline. Also, the contributions will be divided such that each fund again will have 25% of total contribution made since 2005.
For more on Crossing Generations, check back every Thursday for a new segment.
This is not financial or investment advice. Please consult a professional advisor.
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