Navigating a 529 account with the Bear Catchers require a much higher degree of finesse.

Because of the additional constraint the account imposes - ie limits 2 trades /per year. And MORE IMPORTANTLY the prospect of a 10 Yr ( avg) fixed time horizon - you typically want the account allocation to meet the College expense threshold and switch to a very conservative allocation ( for most its the Vanguard Defensive/Safe) about the Senior year.

Yes - the prospect of a simple Seasonal switch is tempting - ie hold the Bullish months and stay out the softer months - but over a LT both periods have a positive expectation.

I once many years back ran a Spreadsheet to simulate ranges of outcomes for my daughter's 529 .... a few pointers

(1) The KEY to understand is the 2 components : Your regular/monthly contributions - and their allocation. [ This you have very good control and practically no limit other than monthly switches]

And the total account balance which is subject to the 2 rebalances /yr rule.

(2) NH-NL is the FASTEST of all bear catchers - by DESIGN. While DBE is the SLOWEST - ie most delayed of them

IIRC - A DBE type exit combined with a NH-NL rising strategy was the most appropriate. This was you DONT rebalance often - Only when the perceived risk is high enough.

While you can use the status of the NH-NL can dictate your new funds. I dont think they necessarily beat out B&H - but would have put you on better Probabilistic outcomes in terms meeting the College goals - eg If you were unlucky enough to Start in 1997-98 and needed it 2008-2009 - you would have been taken to the cleaners with B&H.

Because there's a POINT OF INFLECTION in this also - initially your contributions matter the most and then as you are coming close to the impending need - the balance.

A 529 is actually a Defined Target/Maturity Balanced Equity strategy - the constraints make it a much HIGHER COMPLEXITY problem.

Hope this helped!

Mechanical Investing FAQ

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