Yes, You Can Save for College!

Next, choose your investment approach.

Most 529s let you pick among a number of different mutual funds (which invest in stocks, bonds, and other securities) and offer portfolios to match your risk tolerance, whether you're conservative, aggressive, or some-where in between. There's also a popular hands-off alternative that works well for most parents: picking an age-based portfolio, in which your asset allocation changes automatically, from stock-heavy holdings when your child is young to a less-risky balance as he gets closer to college age. Before selecting this option, though, you should examine how the money is divvied up at the beginning and end of the age spectrum. "Every plan handles these portfolios a little differently," says Hurley. "So it's important to make sure you have the same idea about risk."

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