Finding your asset mix
Choosing investments isn't a one-size-fits-all kind of thing. However, there are certain broad principles that apply to picking an asset mix.
Your asset mix should align with your personal situation: how much time you have until you'll need the money, and how much risk you can take and still sleep at night.
Target Enrollment Portfolios can meet these needs because they're based on your risk level and the year your beneficiary is expected to enroll in school.
Here's how these pieces of information are used to create an asset mix.
1. When do you need the money?
If you are not planning on using your savings until your beneficiary enters college, you might have many years to let your money compound—and to ride out any temporary downturns in your account balance. So you can afford to take on a little more risk in the hopes of getting higher returns.
But if you're starting to save when your beneficiary is already in high school, you won't have much time to wait for the market to bounce back if it should hit a rough patch. You also won't have as much time to benefit from compounding. In this case, you might be better off in an asset mix with lower risk.
2. How much risk are you comfortable with?
Some people can easily ignore day-to-day changes in account balance that sometimes come with more aggressive investments. Instead, they focus on their overall progress toward their goal. Others may stay awake at night fretting about what their investments will do tomorrow.
It won't do you any good to constantly worry over your investment decisions, and it probably won't be much fun either. So choose only a level of risk you know you can stand.
