Morningstar Advisor - Summer 2008 - 41

Spotlight relies on solid Vanguard index funds, but it doesn’t provide investors with any international exposure. That means that the plan is missing the gains made in foreign markets, and it has no buffer when the U.S. market turns down. Nebraska AIM College Savings Plan growth-tilted portfolios. College savers can find better diversification at a lower price at the state’s two direct-sold options. (Dis)honorable Mentions Nebraska’s AIM College Savings Plan is the only holdover from last year’s worst list. The broker-sold plan made some changes to its lineup in 2007, but it still charges as much as 1.61% in annual asset-based fees for generally Some plans just barely escaped our worst list. While Iowa Advisor 529 Plan relies on decent American Century funds, its layers of fees and poor diversification on the fixed-income side undercut its appeal. Kentucky Education Savings Plan Trust looks lackluster on flexibility. Investors are forced to choose among an age-based plan, an all-equity portfolio, and an ultraconservative guaranteed option, leaving them few tools with which to customize. Finally, although Alabama Higher Education 529 Fund, a worst constituent in 2007, offers an improved equity lineup, the state continues to tax the earnings on out-of-state plans, which serves to strongarm investors into the home-state plan. We’d like to see the state adopt the tax standards that have become the industry norm. K Marta Norton is a fund analyst with Morningstar. Researching 529 Plans You can use Morningstar Advisor Workstation Office Edition to study and monitor 529 plan and portfolio information. Click the Research tab on the left-hand navigation panel; then click the College Savings Plan option to expand it. This is your access to two 529 databases. Choose 529 Plans to view plan-level information. Within the Plans database, use the View drop-down menu to see different sets of data points, including a snapshot of the plan, fees and expenses, and purchase information. You can double-click a column’s header name (such as State) to sort by that column. The Secondary Rank icon on the toolbar allows you to sort on two columns, such as State (Ascending) and % of Funds 4-5 Stars (Descending). Click a plan name to view full plan summaries and reports on the plan’s underlying funds. The summaries and reports can be printed as PDFs. 529 Portfolios contains information on plans’ individual holdings. You can screen for funds belonging to a particular plan, as well as other metrics related to risk, return, asset allocation, composition, and fees and expenses. Click a portfolio name to see an investment detail report on the fund, which can be printed as a PDF. This report breaks down the composition of the portfolio, lists investment style and stock statistics, shows sector weightings, and displays total return versus peer groups. MorningstarAdvisor.com 41

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Morningstar Advisor - Summer 2008

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