How do I choose investments for my child’s college fund?
Investing for a college fund is vitally important. How you invest the money is almost as important as how much you save. A bad investment could leave you without any college savings. Consider the following guidelines to help you invest for your child’s college savings—assuming you have at least 10 years before your child will finish college.
Take only low to moderate risk. Risk-taking increases expected returns, but also increases the probability of loss. Even with 20 years until your child finishes college, there may not be enough time to recover from big losses. Keep your college fund investments conservative.
Individual stocks, even mutual funds invested in stocks, may be too risky for most people. Virtually any stock can drop in value. Mutual funds that invest in stocks can drop dramatically–as we saw in 2008 and 2009. You don’t want to have your college fund invested in stocks when the market tanks.
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