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Do 529 plans' age-based funds fall short on diversification? Age-based portfolios in 529 college saving plans share many of the same characteristics as target-date retirement funds, according to this article on Morningstar, but there also are difference your clients should know. Both gradually move from an emphasis on equities to fixed-income over time, and they aim to provide investors with a single, well-diversified portfolio. Age-based options in 529 college savings plans look different from target-date retirement bonds, however, because of the disparity in their time horizons. A Morningstar study found that 529 age-based portfolios have adequate exposure to large-cap U.S. equities and other core asset classes but are less exposed to more-specialized asset classes compared with target-date funds. Also, more target-date series incorporate more high-yield bond funds than do age-based portfolios in 529 plans, the study found. --Morningstar
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