Low-cost ETFs are making headway in 529 savings plans that help parents stash away money for their children’s college education as tuitions continue to skyrocket.
For example, investment researcher Morningstar this week recognized Arkansas’ iShares 529 Plan with a silver medal in its annual review of the largest 529 college-savings plans.
“As its name suggests, the plan includes only exchange traded funds, which are inexpensive replications of indexes that trade like individual stocks. ETFs have become a popular addition to 529 plans, but iShares has been a pioneer in the ETF-only trend in 529s and has a strong cost-benefit profile,” Morningstar said.
BlackRock, which manages the iShares ETFs, has announced expense ratio reductions at several products. [BlackRock Hits Back at Vanguard, Schwab with iShares ETF Fee Cuts]
“ETFs are increasingly being included in 529 college-savings plans. Sixteen plans now include at least one ETF option, up from just a handful a few years ago,” Morningstar reports.
State Street Global Advisors is also exploring the 529 plan business. The firm’s plan was launched in April 2012, and offers a diversified family of ETFs. Other states are in on these plans, such as Nevada, Maine and Indiana. Missouri and Ohio are using ETFs in age-based options. [ETFs Gaining Momentum in 529 Plans]