A 529 Plan is a way to save money for college that may give you some tax breaks. Many people have been concerned about investing with recent market fluctuations. If you already have a 529 plan, you may be concerned that your balance will fall with the market. If you are in the process of saving, you can take this time to decide, under the advice of a financial adviser, if you are more comfortable investing in more stable entities or if you are okay with long-term fluctuations.

Some people may have been advised to invest in risky stocks because they had plenty of time to save for college. This is not necessarily bad advice, if you have a high tolerance for risk. If you have qualms about seeing your balance go up and down dramatically, you might choose to invest in something a little more stable, like a mutual fund invested in stocks and bonds. This is the area of ​​investment that many long-term investors end up in.

Not many people are willing to watch their investment crash with the market. Some may have liked being bolder before 2000, but maybe not so much now. With over 100% returns, many people were simply throwing money into risky investments, with wide eyes. You need to look at long-term results and understand that fund managers achieve these results over time. There may have been some major up and down fluctuations during the years you are looking at. Stock and bond mutual funds give you some risk, so there is potential for faster growth than a bond fund, but that doesn’t necessarily mean there will be more growth than a bond fund.

If you’re getting closer to needing your 529 plan money, you may want to be even more conservative and stick with bond-invested mutual funds. The bonds may even be backed by the government. Since the government has taxing power, the chance of government bonds losing money is very slim. These types of funds can be quite stable.

Bond funds offer dividend payments that can be reinvested in your plan. This may or may not be in your best interest, depending on your tolerance and also your time frame. Generally speaking, if you have many years to save, you can usually afford some risk because you have time to wait out market lows. The fluctuations can be, and sometimes really are, worth it if you can stomach seeing your money go up and down constantly.

Talk to a financial advisor about how to assess your risk tolerance before deciding where to invest your money. The 529 plan is a great way to save money and get some tax breaks. You can even get tax breaks if your plan loses money by deducting the principal loss from your income. These benefits combined with scholarships, grants, student loans, and private student loans can help your child finish college.