Building a 529 savings strategy that is right for you takes planning. The Vermont Higher Education Investment Plan (VHEIP) offers you a choice of six investment options. These options vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that may fit your needs.
For more information on the type of investor for whom each investment option may be appropriate and the risks involved in investing in such investment options, read the Disclosure Booklet (PDF).
- Managed Allocation Option
- Diversified Equity Option
- Equity Index Option
- Balanced Option
- Fixed-Income Option
- Principal Plus Interest Option
Changing Your Investments
Once you invest in a particular investment option, you can transfer contributions and any earnings to another investment option once per calendar year or upon a transfer of funds to a VHEIP account for a different beneficiary.
Periodically Review Your Investments
It's a good idea to periodically re-evaluate your investment strategy as your goals, investment horizon, and personal situation change - for example, annually at tax time, on a yearly basis if your income changes, or upon the birth of another child.
Managed Allocation Option
(Risk level shifts from Aggressive to Conservative)
This investment option seeks to match up the investment objective and level of risk to the investment horizon by taking into account the beneficiary's current age and the number of years before the beneficiary turns 18 and is expected to enter college. Depending on the beneficiary's age, allocations to this option will be placed in one of six Age Bands, each of which has a different investment objective and investment strategy. The Age Bands for younger Beneficiaries seek a favorable long-term return by investing primarily in Mutual Funds that invest in equity or real estate-related securities, each of which has a high level of risk, but greater potential for returns than more conservative investments. As a beneficiary nears college age, the Age Bands allocate less to Mutual Funds that invest in equity and real estate-related securities and allocate more to Mutual Funds that invest in fixed-income and money market securities to preserve capital.
As the beneficiary ages, assets in your account that are attributable to this option are moved from one Age Band to the next on the first "rolling date" following the beneficiary's fourth, eighth, twelfth, fifteenth and eighteenth birthdays. The rolling dates are March 20, June 20, September 20 and December 20 (or the first business day thereafter).
Diversified Equity Option
Called the 100% Equity Option until 11/30/09
(Risk level - Aggressive)
This investment option seeks to provide a favorable long-term total return, mainly through capital appreciation and investment income. This investment option attempts to achieve its objective by allocating assets to Mutual Funds that invest in equity securities of larger, well-established companies that offer a growing stream of dividend income, medium-sized and smaller companies, companies engaged in the real estate industry, and foreign companies. This investment option allocates 80% of its assets to Mutual Funds that are actively managed, over 50% of its assets to funds that use a growth investing style, and approximately 5% of its assets to a Mutual Fund that pursues the value investing style. This strategy differs from the strategy prior to November 2009. Under that strategy, this investment option splits its allocation between actively managed and index Mutual Funds. With respect to asset class categories, it allocated approximately two-thirds of its assets to Mutual Funds that invest in the large-cap asset class category, approximately one-third of its assets to Mutual Funds that pursue value investing, and approximately one-third to a Mutual Fund that uses the growth investing style.
Equity Index Option
(Risk level - Aggressive)
This investment option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in equity index funds. This investment option has a high exposure to domestic and foreign equities.
(Risk level - Moderate)
This investment option seeks to provide favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and investment income by investing in a balanced combination of equity and fixed income Mutual Funds (at this time, approximately 60% is invested in equity funds and 40% is invested in fixed-income funds).
(Risk level - Moderate)
This investment option seeks to provide preservation of capital along with a moderate rate of return through a diversified mix of fixed-income investments.
Principal Plus Interest Option
Called the Interest Income Option until 11/30/09
(Risk level - Conservative)
This investment option seeks to preserve capital and provide a stable return. This investment option seeks to achieve its objective by allocating its assets to a Funding Agreement issued by TIAA-CREF Life to VSAC, which is the policyholder under the agreement. The Funding Agreement provides for a return of principal plus a guaranteed rate of interest and allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. The interest rate guarantee is made only to VSAC, and not to account owners or beneficiaries. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for any future periods.
Effective October 1, 2014, accumulations (including contributions and earnings) under the Funding Agreement for the Principal Plus Interest Option as of September 30, 2014 will be credited to VSAC with an effective annual interest rate of 1.25%, and are guaranteed to earn this rate through September 30, 2015, subject to the claims-paying ability of TIAA-CREF Life Insurance Company.
Reflects current allocations for all investment options. Allocations are reviewed and adjusted periodically.
Account values are not guaranteed and will fluctuate with market conditions. For a complete discussion of risks associate with each investment option, please refer to the Disclosure Booklet.
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