Twenty-nine plans earn medals from Morningstar analysts.
In an annual review of the largest 529 college-savings plans, Morningstar identified 29 plans that rose above their typical peers, awarding those plans Gold, Silver, and Bronze Morningstar Analyst Ratings for 2014.
These forward-looking, qualitative ratings signal Morningstar's conviction in the plans' abilities to outperform their relevant benchmark and peer groups on a risk-adjusted basis over the long term. Morningstar evaluates college-savings plans based on five key pillars--Process, Performance, People, Parent, and Price. Gold- and Silver-rated plans are those that our analysts consider the most appealing to college savers, with reasonable fees, strong investment options, and capable oversight. Analysts award Bronze ratings to those plans that also have attractive features, although these plans don't garner as much conviction as the Gold- and Silver-rated plans.
In addition to these top tiers, Morningstar also assigned 32 Neutral ratings, a reflection of the team’s belief that while these plans are unlikely to deliver standout risk-adjusted returns, they are also unlikely to significantly underperform. These plans may have shorter track records or untested components. Relatively expensive plans with meaningful state benefits may also earn a Neutral rating, as while these plans' price tags will continuously drag on results, they could have appeal for in-state residents.
Only three plans earned Negative ratings, an indication that the plans have one or more significant flaws that are likely to hold them back over the long term. In general, the 529 industry has taken great strides to improve its offerings over the years, and it's rare to see plans with weak underlying investments or extremely high fees.
This year, Morningstar upgraded five plans and downgraded 10, compared with seven upgrades and one downgrade in 2013. Although more plans moved down than up this year, those on the rise lowered expenses or increased the quality of their investment lineups. Meanwhile, the downgraded plans' investment options either had deteriorated or were unproven.
2014 Morningstar Medalist 529 College-Savings Plans