By Amanda Muir, Principal and head of Education Savings Group at Vanguard
December 29, 2020
Vanguard recently released its economic forecast for 2021. In short, predictions trend upward with expectations for a gradual, yet perhaps uneven, recovery based largely on the success of the COVID-19 vaccines that are on the way.
But as the head of Education Savings at Vanguard and a mother of two young children, I combed through the expert analysis and research to understand what the outlook could mean for the education savings industry and the individual saver as well.
What should investors hope to find in such an economic outlook? Perhaps that word “hope” says it best. I hope to see that by “staying the course”―as Vanguard’s principles for investing success affirm―I continue to do the right thing. I haven’t stopped investing regularly for education, even as 2020 markets plummeted and then bounced back at almost the same speed. And, as I’d also hoped, I’m not alone.
How America Invests research explains that Vanguard investors stayed the course during the volatile first half of 2020. Only 22% of households traded, and of those, 62% moved assets into equities while less than 1% abandoned equities completely. The past year’s rebound in equity prices rewarded the many disciplined investors who remained “invested in the stock market despite troubling headlines.”*
Continuing on course
It’s good to know that the outlook for 2021 is one that’s positive, albeit modestly so. While economic conditions made it somewhat tempting to tamper with my asset allocation a few times this past year, my kids are still young, so I’m investing for the long term. I know it’s easier to predict the weather than it is to foresee market swings, and I’ve learned that an adjustment in how you’re investing should be based on changing goals or new time horizons—not market events.
To help me remain disciplined, I’m investing for college in target enrollment portfolios, which are broadly diverse, low-cost portfolios, offered by many 529 education savings plans. Target Enrollment Portfolios adjust their allocations for me and become more conservative as my child’s expected enrollment date draws nearer. Knowing that I have professional expertise taking care of the allocation adjustments necessary to help me meet my goals makes it far less inviting for me to make any changes on my own.
And to further reduce the risk of market-timing, I’ve also made saving nearly effortless by setting up a plan for automatic recurring contributions. That way my saving continues on a schedule I choose, and I don’t have to do anything more than check my allocation annually to see that it still aligns with my time frame and goal.
A future focus
While I’m ready to take a deep breath, wipe my brow, and fondly bid 2020 goodbye, I’m grateful it reinforced that my strategy of sticking to my long-term investment plan and ignoring market swings is the way to go.
It feels good to be confident in my investing plan and, as a parent, to have one less thing to worry about as I look forward to a happy new year!
About the Author
Amanda Muir is a principal and head of Education Savings Group in Vanguard Retail Investor Group. As head of Education Savings, Amanda leads an organization that serves state 529 plan sponsors and individual 529 account owners. Additionally, Amanda plays an active role in the Women’s Initiative for Leadership Success (WILS) employee resource group and supports Vanguard’s efforts with talent oversight and development. She’s also the chair of the Arizona Hometown Grants program, which aims to financially support local organizations that help families break the cycle of poverty. She first joined Vanguard in 2007 and has been a member of the Vanguard leadership team since 2008. Amanda earned her undergraduate degree from The University of Arizona and her M.B.A. from Drexel University’s LeBow College of Business.
*Source: Vanguard Economic and Market Outlook for 2021: Approaching the Dawn (Joseph Davis, PhD, et al., 2020).
All investing is subject to risk, including the possible loss of the money you invest.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
For more information about The Vanguard 529 College Savings Plan, obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.
If you are not a Nevada taxpayer, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Other state benefits may include financial aid, scholarship funds, and protection from creditors.
The Vanguard 529 College Savings Plan is a Nevada Trust administered by the office of the Nevada State Treasurer.
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