Stocks for college planning?

Roger_Dooley
Tue, 04 Oct 2011 09:36:38 +0000

Qdogpa, what’s your planning horizon? The closer you get to needing the money, the less you want to be in volatile equities. At the same time, it’s hard to get excited about “safe” investments like government bonds that pay next to nothing in interest and which will get killed if inflation rises. With our crazy spending, inflation and interest rates are bound to go up eventually, and you don’t want to be holding long bonds when that happens.

I’d avoid tech hi-flyers as too risky. Maybe Amazon will take over the world, maybe not. Some nice dividend stocks could be a good compromise. Look for companies with plenty of cash and a reasonable business outlook, plus a steady/rising dividend history. You’ll have a little protection in modest market downturns and a decent return from the dividends. You could protect yourself with diversity by using an ETF or mutual fund geared to dividends. If the market crashes, though, you’ll still see a loss. And be careful, sometimes a high dividend rate indicates a poor prognosis or at least higher risk.

Good luck!