T Rowe and Vanguard Win Praise for 529s
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Tuesday, October 26, 2010

T Rowe and Vanguard Win Praise for 529s

Five 529 plans received top billing from Morningstar and made Morningstar's Best 529 Plan list for 2010. Morning star said these plans are "the hands-down best choices for local residents, but they're also contenders for those willing to leave home for a best-of-breed plan".

Most notably, T. Rowe Price College Savings Plan [see profile] and Maryland College Investment Plan were praised for their "thoughtful management" style emphasizing actively managed funds, rather than index funds.

Also, the Vanguard 529 College Savings Plan [see profile] was recognized for its "cheap indexed options", featuring an expense ratio of 25 basis points on its age-based options. And CollegeAmerica, which is run by American Funds [see profile], a broker-sold family of funds "known for its patient, risk-aware investing style," also got a nod from Morningstar.

Plans that didn't make the grade include Georgia's Path2College 529 Plan, which is run by TIAA-CREF [see profile] and "charges nearly twice as much as The Vanguard 529 College Savings Plan's 0.25 percent per year," and the Tomorrow's Scholar College Savings Plan because its investment options, which are mostly from Wells Fargo [see profile], "have turned in some of the worst risk-adjusted performance relative to similar peers," according to Morningstar.

The only plan to get Morningstar's Bottom rating was CollegeBoundfund of Rhode Island, which has a poor long-term track record coupled with personnel turnover at program manager AllianceBernstein [see profile]. The firm was hard-hit during the 2008 market downturn.

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