&l;p&g;Market volatility spooks most stock investors, but it&s;s really gnarly for college savers.
What if the market tanks just before you have to pay tuition bills? What if you come up short? That&s;s the fear of millions of parents.
For most college savers, they are likely saving in 529 plans. These state-offered programs allow for tax-free savings in mutual fund portfolios. As long as you use the proceeds for educational expenses, withdrawals are tax free.
Still, there&s;s the fear of a market downturn that&s;s going to erode your total savings. What do you need to keep in mind? Here are some guidelines from Kathryn Flynn of &l;a href=&q;https://www.savingforcollege.com/article/don-t-panic-what-to-do-with-college-savings-in-a-volatile-market?utm_source=Saving%20for%20College&a;amp;utm_campaign=4b458766c7-EMAIL_CONSUMER_WEEKLY_01-02-2019&a;amp;utm_medium=email&a;amp;utm_term=0_02bf056f97-4b458766c7-18346889&q; target=&q;_blank&q;&g;savingforcollege.com&l;/a&g;:
&l;img class=&q;dam-image getty size-large wp-image-1069370534&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1069370534/960×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; Getty
&l;strong&g;– An &q;Age-Based Portfolio&q; will Reduce Risk.&l;/strong&g; Don&s;t try to pick and manage mutual funds yourself. You will guess wrong on market moves and lose money.
&l;span&g;Writes Flynn: &q;529 plan investment portfolios generally offer &l;em&g;age-based&l;/em&g; and static asset allocations. With an age-based option, the asset allocation is designed to automatically shift away from stocks and move toward more conservative investments as the child gets closer to college. Investors can rely on the 529 plan&a;rsquo;s investment manager to manage risk based on the child&s;s age.&q;&l;/span&g;
&l;strong&g;– Keep Investing in All Kinds of Markets.&l;/strong&g; Should you stop investing when the stock market is swooning? Nope. That&s;s when you can buy more shares at lower prices. This strategy is called &q;dollar-cost averaging.&q;
&l;span&g;&q;With dollar-cost averaging, a fixed amount is invested at pre-determined intervals. When markets are up and share prices are higher, investors purchase fewer shares per dollar invested, and when markets are down and share prices are lower, investors are able to purchase more shares.&q;&l;/span&g;
&l;strong&g;– Stay the Course — Even in Sour Times.&l;/strong&g; It makes little sense to pull out during a downturn. Stay in your 529 plan until you need to money to pay bills.
&q;The stock market dropped by as much as 40% in 2008 and continued to fall until it hit rock bottom in March 2009. Many investors panicked and pulled their money from the stock market, essentially locking in their losses.
But, investors who remained calm and continued to invest reaped the benefits of the markets steady improvement through January 2018.&l;span&g;&a;nbsp;&q;&l;/span&g;