Investing Basics

Is a 529 Plan: A state-sponsored, tax-advantaged college savings program established under and operated in accordance with IRC §529 to help save for qualified education expenses. your first time investing? If so, it’ll be helpful for you to understand some investing basics so you are better informed when it comes time to make important investment decisions. Also, you will be required to designate a Financial Advisor: Any individual or entity that is appropriately licensed and who has entered into an agreement with the Plan Distributor to distribute Savings Trust Agreements and interests in the Plan represented by Accounts to public investors. This term may include brokers and financial intermediaries such as investment advisors or banks. at enrollment who can provide assistance to you in making those decisions. You should thoroughly review the Plan Description and Savings Trust Agreement for detailed information about the investment options before enrolling in the Plan: The LoneStar 529 Plan, which is a 529 Plan. In this section, we provide summary-level information about:

Balancing Risks & Rewards

Achieving a higher rate of return on investments often means taking on more risk.

Of the three primary asset classes—equity, fixed income and credit, and stable value — stable value investment generally poses the least risk. In comparison, investment in fixed income and credit is generally considered moderate risk, and investment in equity generally carries the greatest risk for investors. Not surprisingly, stable value investments generally offer the least amount of profit and equities generally have the potential for the greatest return.

So, how do you balance risk and reward? In order to determine your comfort level on the risk/return spectrum you have to ask yourself some important questions. What is your time horizon? What tradeoffs are you willing to make to try to maximize returns? What is your investment priority: increasing returns, reducing risk or a combination of both?

Allocating Your Assets

There is no way to predict how well the markets or particular investment options will perform over time.

Diversifying your assets, or spreading them around to different investments, stocks, bonds, Real Estate Investment Trusts, commodities and stable value, is a useful strategy as it allows you to greatly reduce your portfolio’s exposure to any one type of asset class.

Overall, a diversified portfolio is generally less risky because even if some of your holdings go down, others may go up.

In 529 Plan: A state-sponsored, tax-advantaged college savings program established under and operated in accordance with IRC §529 to help save for qualified education expenses. , many invest in age-based or target enrollment date portfolios that start out with a more “aggressive” portfolio (with more equity funds) and later shift toward “conservative” investments like fixed income funds, which seek income and principal protection as the Beneficiary: The individual identified by the Account Owner whose qualified education expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose qualified education expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established. nears college age.

INVESTMENT STRATEGIES

Investments from Industry Leaders

Saving for qualified education costs often means selecting investments— a task that can seem overwhelming. However, the LoneStar 529 Plan helps by offering three investment options— Target Enrollment Year, Risk-based, and Individual Asset Class—tailored to different growth requirements, situations, and risk tolerances. Portfolios include different investment allocation strategies from industry leaders Artisan, Baird, DFA, Dodge & Cox, Eaton Vance, Federated Hermes, Neuberger Berman, PIMCO, T. Rowe Price, Vanguard, and New York Life.

Target Enrollment Year Option

Your savings are placed in a portfolio that you select based on a variety of factors, including the expected year of your Beneficiary: The individual identified by the Account Owner whose qualified education expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose qualified education expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established. school enrollment, your investment view and risk tolerance. The Plan: The LoneStar 529 Plan, which is a 529 Plan. will periodically (typically, every six months) adjust the holdings in the portfolio to reduce risk as the target Enrollment Year: The expected college enrollment year of your beneficiary, typically at age 18. approaches. As a result, when your beneficiary is younger, the portfolio will be weighted more heavily in equity investments. As the portfolio nears the enrollment year you select and your beneficiary approaches school age, the portfolio will be weighted more heavily in fixed income and stable value investments.

Risk-based & Individual Asset Class options

If you choose a Risk-based or Individual Asset Class portfolio, your investment does not change with the age of the Beneficiary: The individual identified by the Account Owner whose qualified education expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose qualified education expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established. Each of our Risk-based Portfolios: Investment vehicles featuring the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon, and other factors. offers a group of investments that, together, target a specific risk profile. The Individual Asset Class portfolios focus on a single type, or class, of investment and allow you to design your own Asset Allocation: A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market. Your investment will remain in the portfolio(s) you select until you instruct the Plan: The LoneStar 529 Plan, which is a 529 Plan. to move to another portfolio.