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Fund Spy

College Savers Easing Back Into the Market

Cash no longer king, but caution still rules.

Nearly two years after college savings were decimated in 2008's market crash, 529 account holders are increasingly exposing their education nest eggs to market forces.

Fund flow data from Morningstar shows that among investment options with steady asset allocations, 529 college-savings plan assets are moving away from cash and into investment options featuring stocks and bonds. To be sure, flows into all 13 Morningstar categories for static 529 investment options were positive, but 79% of flows over the past 12 months have been into hybrid investments, which include stocks and bonds, or into pure equity investments. About 1% of flows into static 529 investment options went into money market choices, with the remainder into bond investments.