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How age-based options work

If you're investing for college, age-based options are designed to give you the best chance at returns given your risk tolerance and time frame.

They help you manage risk

Diversification, or spreading the money in your account among asset classes, is a powerful investing principle. Why's that?

Each asset class has its own set of risks as well as different gains and losses over time. So diversifying among the three asset classes brings balance to your account. In turn, it makes the overall return on your money less volatile.

All of our age-based options are diversified among stock, bond, and cash (short-term reserve) investments, in proportions that meet your college timeline.

Keep in mind that age-based options are generally designed for college savings and may not be appropriate for K–12 time horizons. If you're investing for K–12 goals, you should consider an asset mix made up of individual portfolios.

They take some of the work off your hands

Not only are age-based options professionally assembled using a mix of asset classes, but your money in them is automatically moved from one investment to another to match your needs as your child gets older.

For instance, the younger your child, the more we invest your money in stocks. That's because the main goal of stock investments is to increase in value. Stocks have a higher risk of short-term losses, but since you won't need the money for several years, you have time to wait for your balance to recover.

As your child grows older, your money shifts to increasingly conservative portfolios that have higher concentrations in bonds and cash (short-term investments). This helps to reduce your risk of losses as you get closer to college.

They help you focus on the long term

No asset mix promises a steady influx of earnings or comes with a guarantee that you won't lose money. The markets will fluctuate over time, and it's natural for some investors to be tempted to switch strategies when their accounts' growth slows or temporarily reverses.

But that often turns out to be a bad idea. For example, if you decide to remove bonds from your portfolio when their returns are down, they'll no longer be there to buffer you from losses in your stock portfolio when the markets inevitably turn again.

Because age-based options—designed for higher education—are managed for you, you'll feel less pressure to make drastic changes based on temporary fluctuations. It's still recommended that you periodically check your investments to make sure they align with your goal.

The Vanguard 529 College Savings Plan is a Nevada Trust administered by the office of the Nevada State Treasurer.


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Asset class

A major type of asset—stocks, bonds, and short-term or "cash" investments.

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Learn about the asset classes

Stock investments

Main goal: gaining larger earnings in exchange for a larger amount of risk.

Stocks can be domestic (from the United States) or international.

Main risks: Stock prices could drop for a variety of reasons, including a company's poor performance and broad concern about the economy. Downturns in the stock market tend to be worse than downturns in the bond market.

Average annual return: 10.3% (for U.S. stocks).*

The stock portions of our portfolios are invested in Vanguard Total Stock Market Index Fund and Vanguard Total International Stock Index Fund (the proportions invested in each fund vary by portfolio).


Main goals: gaining a moderate amount of earnings in exchange for a moderate amount of risk; offsetting the larger risk of stocks.

Bonds can be domestic or international. Having both in your portfolio helps spread your risk even more.

Main risks: Rising interest rates could push bond prices down, and the bond's issuer could default.

Average annual return: 5.3% (for U.S. bonds).*

The bond portions of our portfolios are invested in Vanguard Total Bond Market II Index Fund and, where appropriate, in Vanguard Inflation-Protected Securities Fund (the proportions invested in each fund vary by portfolio).

Cash (short-term reserves)

Main goal: keeping a stable value. You probably won't lose money with these investments, but you won't gain much either.

Main risk: The rate at which you earn money could be lower than the rate of inflation.

Average annual return: 3.4%.*

footnote*All average return data covers the period from 1926−2019. For U.S. stock market returns, we use the Standard & Poor's 90 from 1926 through March 3, 1957; the S&P 500 Index from March 4, 1957, through 1974; the Wilshire 5000 Index from 1975 through April 22, 2005; the MSCI US Broad Market Index from April 23, 2005, through June 2, 2013; and the CRSP US Total Market Index thereafter.

For U.S. bond market returns, we use the S&P High Grade Corporate Index from 1926 through 1968, the Citigroup High Grade Index from 1969 through 1972, the Lehman Brothers U.S. Long Credit AA Index from 1973 through 1975, the Barclays U.S. Aggregate Bond Index from 1976 through 2009, and the Spliced Barclays U.S. Aggregate Float Adjusted Bond Index thereafter.

For U.S. short-term reserve returns, we use the Ibbotson 1-Month Treasury Bill Index from 1926 through 1977 and the Citigroup 3-Month Treasury Bill Index from 1978 through present.