What percentage in stocks for 2 year old's 529?

[Lusitan]

I've got a 529 for my 2 year old. Right now, I'm about 80% in stocks in that account, but most of that was purchased in pre-crash 2007/2008. Since I've got 16 years before we'll need this money, I'm thinking now's a good time to at least try to lower my cost-basis in stocks by shifting it to a 100% stock allocation at this point.

What do you guys think? I'm still OK with stocks for my retirement, but that's farther out than 16 years, so this middle-ground time period I'm not sure whether I should be as heavy in stocks. But now does seem like a good time to buy on the cheap.

Edited to add: To clarify, long-term I plan to of course gradually move from stocks to bonds as he approaches college-age. In my asset allocation, I had 80% stocks as the highest allocation for the early years, gradually reducing the amount from there.

But with the recent market crash (and having lost about 20% of the portfolio at this point) I'm thinking that maybe I should be more aggressive, starting from a position of 100% stocks and gradually decreasing from there. And if so, now is a good time to do so. The new money I'm contributing each week is going into 100% stock index funds, but it's only a small amount because I'm focusing on bulking up my emergency reserve fund. So the increase in the stock allocation would come from exchanging some bond index funds for stock index funds.

 

[ziggy29]

Bad time to ask -- right now I'd say zero, which means it's probably good to be aggressive.

One of the things this market has taught me is that I'm never again going to be comfortable with a 100% stock allocation regardless of time horizon.

 

[2soon2tell]

Luistan,

Why not purchase a target retirement fund with a date approximating when your two year old will reach college age. The fund managers adjust the AA as you reach the target date.

2soon2tell

 

[jIMOh]

How often do you make contributions?

I have twins which are 11 months old today
<--------- there picture should be over here.

Their 529 is 50-50 (50% windsor II and 50% inflation bonds). My logic is that with 18 years the best I could do with equities is doubling the money twice and the worst I could do is pay for college 4 times (2X based on 529 contributions losing 50%+ value and 2X because I still have to pay for it when the bill comes).

I use the 529 for the state tax deduction and to shield interest from taxes, but if the $20,000 I contribute over 18 years for each kid is $30,000 when I need to withdraw, I am much more comfortable with that than contributing $20,000, seeing it become $10,000, then needing to come up with the other $20,000 for tuition again (The $30,000 per kid price tag I am putting as a contribution to kids eduction will not change).

Taking on more risk to make up for losses is probably a fools game.
If you make frequent contributions (I do not), then maybe this advice would change.

 

[clifp]

I think 100% for somebody that young.

 

[Dawg52]

-0-

 

[soupcxan]

My gut says: NONE.
But my brain says: 100% Wellesley.

 

[ziggy29]

My gut says: NONE.

Isn't that the truth. The thought of putting any new money into the stock market makes me sick.