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By Christine Benz | 10-25-2010 12:00 PM

How Have 529s Performed Since the Downturn?

529s are still in the red from the downturn, but there are several encouraging signs, says Morningstar's Laura Lutton.

Christine Benz: Hi, I'm Christine Benz for has recently launched some new data and research about 529 college-savings plans. Here to discuss the new features with us today is Laura Lutton. She is director of editorial research for Morningstar.

Laura, thanks so much for being here.

Laura Lutton: Thanks for having me.

Benz: So Laura, I want to discuss performance from these 529 plans. A lot them got a black eye during 2008, some of them had poor performing individual investment choices. Some had overly heavy equity allocations. What have you seen from this group generally since that time?

Lutton: Most 529 investment options are still in the red from 2008. The average option lost 24% of its value in just that year alone. So, that's a lot of ground that these options have to make up, and many of them have done better certainly since then, but they're still in the red and have ways to go to make it up.

Benz: So Laura, you know that you and the group have done some great work in which you have categorized 529s much as we do with mutual funds. So, now you can compare them on an apples-to-apples basis, which is really helpful.

What do you see, though, when you step back and look at 529 performance, so the performance of investment options within a given 529 category versus mutual funds in that same category?

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