Nevertheless, the wider range of mutual fund products included have not held up. For instance, 529 plans on average lost about 1% last year, whereas the S&P 500 gained 2%. In contrast, the Arkansas iShares 529 plan returned 3.3% in 2011 and has returned an average of almost 1% since 2007, compared to the 3% industry loss.
The 529 plan investment managers are adding ETFs in an attempt to make quick and easy changes to portfolio allocations at a fraction of the cost. ETF products can be traded throughout the trading day while mutual funds can only be reconstituted at the end of the day. Additionally, 529 plans with ETFs have an average expense of 0.61%, compared to the industry average of 1.12%.
“We’re trying to help performance [and]it appears that ETFs can respond faster to market conditions,” Deborah Goodkin, managing director of college-savings plans at the First National Bank of Omaha, said in the article.
For more information on ETFs in 529s, visit our 529 savings plan category.
Max Chen contributed to this article.