This article is part of Virginia529’s “Three Things to Know” Investment Portfolio series, highlighting more than 20 portfolio choices available to Invest529 customers. The information presented is an overview of the plan’s investment options and should not be considered advice. Before selecting a portfolio consider factors such as the age of your child and your tolerance for risk. Past performance is no guarantee of future results. 

Index portfolios match the risk and return of the stock market. Index portfolios typically offer lower fees than other investment options.

What is an Index portfolio? 

An index portfolio is designed to replicate the performance of a specific market index, like Nasdaq or the Bloomberg U.S. Aggregate Bond Market.

When you choose an index portfolio, you are fully investing in specific market with a wide and diverse range of assets.

There are a variety of Invest529 options including total stock, total bond, total international stock, inflation-protected securities and real estate investment trust (REIT) index portfolios.

How is an index portfolio managed?

Index portfolios are often passively managed, meaning assets are not actively traded or adjusted based on market conditions.

These portfolios have benchmarks in place to ensure the portfolio is still tracking with the market. Typically, if a benchmark changes, the investment manager makes asset adjustments.

Fees are often lower for index portfolio because they are passively managed.

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How do index portfolios perform?

Index portfolios focus on the long term and don’t try to outperform the market for immediate returns. Because index portfolios mirror a specific market index, they are tied to the same risks or fluctuations.

Comparing the benchmark to the actual performance is one way to track a portfolio’s health. The difference between the two, known as a tracking error, can show you how consistent your investment is.

Generally, index portfolios often have lower tracking errors and are a consistent investment option. But it’s important to research index portfolios and choose the one that best meets your goals and financial situation.

Key Takeaways:

• These portfolios track the performance of a broad market and match its risk/return characteristics.
• Index portfolios typically offer lower fees than actively managed portfolios.
• This is a popular option for investors who want to achieve market returns rather than trying to outperform the market.

Review Invest529’s Index Portfolios
 

Low fees, tax advantages and diverse investment options are reasons Invest529 is consistently ranked among the top 529 plans by independent sources.

The examples above are provided for illustrative purposes only and are not intended to reflect or predict the actual performance of any specific investment. Virginia529 cannot and will not provide legal, financial, or tax advice, and nothing herein or in any other written materials shall be construed as such.

For more information on Virginia529’s college savings options, visit Virginia529.com or call 1-888-567-0540 to obtain program materials. These include information on Virginia529 programs, investment objectives, risks, charges, expenses and other important information; read and consider them carefully before investing. Virginia529 encourages prospective participants to seek the advice of a professional concerning any financial, tax or legal implications related to opening an account. For residents of states other than Virginia: before investing, you should consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protections from creditors that are only available for investments in that state’s qualified tuition program.  ©2024 Virginia College Savings Plan. All Rights Reserved.