Fidelity UNIQUE College Investing Plan
I have been using the UNIQUE College Investing Plan to save for my daughter’s future education for a few years. The plan is sponsored by the State of New Hampshire and managed by Fidelity, one of the largest mutual fund companies in the country. The reasons I like the UNIQUE plan are:
- Well diversified funds;
- Low costs;
- Extra contribution with Fidelity 529 College Rewards credit card cashback.
With the UNIQUE college saving plan, I only need $50 initial investment to get started and once the plan is in place, I can invest as little as $15 a month ($45 per quarter) using the automatic investment plan. In addition, the plan doesn’t charge annual account maintenance fee and has no front-load, which means I can invest in the plan directly from Fidelity without having to go through a middle man. Costs of UNIQUE portfolios range from 0.50% for index funds to 0.72 – 1.09% for actively managed funds. And last but not least, this plan allows you to link Fidelity 529 College Rewards Credit Card (if you have one) to the 529 account so rewards (1.5% cashback on everything) you earned by shopping with the card can be automatically invested in the plan.
UNIQUE Investment Options
All UNIQUE portfolios are built with Fidelity mutual funds in four categories, domestic equity, international equity, fixed-income, and short-term funds. With UNIQUE plan, you can have two age-based options to invest your college-saving money: Invest in actively managed funds or index funds. The age-based investment option is like target-date retirement portfolio: Based on the year when your child was born, you select a year (target date) when you expect he/she to go to college, then invest in a portfolio that corresponds to the target date. For instance, if your child was born this year, then he/she will attend college in 18 years around 2026. The portfolio that fits this time frame is Portfolio 2027.
The main benefit of using age-based portfolio to invest is the asset allocation of the portfolio is automatically adjusted (done by the fund manager of course) as the target date approaches, gradually shifting from an aggressive approach (more in equity) to a conservative approach (more in fixed-income). By investing with age-based portfolios, you leave the job of balancing the asset allocation to the fund manager without having to worry about it yourself. Following is a chart illustrating how asset allocation changes as the target date approaches.
As for whether to choose active or passive funds, the main difference is between the two kinds is fee. Passive, or index, funds track some indexes which reduce the requirements for the fund manager to select what to invest. When the index the fund tracks change its components (whether it’s the components themselves or weighting of the components), the fund simply follows the index to the corresponding adjustment, no need for the fund manager to research. On the other hand, active funds requires the fund manager to constantly look for stocks that outperform its peers or indexes, resulting in higher costs in research and fund turnover ratio, all leading to a higher cost than passive funds.
UNIQUE Portfolios
There are currently 27 portfolios offered by the UNIQUE plan (with target asset allocation):
- UNIQUE College Portfolio (Domestic equity 20%, Fixed-income 40%, and Short-term 40%)
- UNIQUE Portfolio 2006 (Domestic equity 20%, Fixed-income 40%, and Short-term 40%)
- UNIQUE Portfolio 2009 (Domestic equity 26.8%, International equity 2%, Fixed-income 43%, and Short-term 28.2%)
- UNIQUE Portfolio 2012 (Domestic equity 34.6%, International equity 4.5%, Fixed-income 43.6%, and Short-term 17.3%)
- UNIQUE Portfolio 2015 (Domestic equity 44.2%, International equity 7.7%, Fixed-income 38.1%, and Short-term 10%)
- UNIQUE Portfolio 2018 (Domestic equity 55.8%, International equity 9.8%, Fixed-income 30.7%, and Short-term 3.7%)
- UNIQUE Portfolio 2021 (Domestic equity 66.2%, International equity 11.7%, Fixed-income 14.4%, and Short-term 7.7%)
- UNIQUE Portfolio 2024 (Domestic equity 73.3%, International equity 12.9%, Fixed-income 3.4%, and Short-term 10.4%)
- UNIQUE Conservative Portfolio (Fixed-income 45%, and Short-term 55%)
- UNIQUE 70% Equity Portfolio (Domestic equity 60%, International equity 10%, Fixed-income 20%, and Short-term 10%)
- UNIQUE 100% Equity Portfolio (Domestic equity 85%, International equity 15%)
- UNIQUE Money Market
- UNIQUE Index College Portfolio (Domestic equity 20%, Fixed-income 80%)
- UNIQUE Index Portfolio 2006 (Domestic equity 20%, Fixed-income 40%, and Short-term 40%)
- UNIQUE Index Portfolio 2009 (Domestic equity 26.8%, International equity 2.0%, Fixed-income 43%, and Short-term 28.2%)
- UNIQUE Index Portfolio 2012 (Domestic equity 34.6%, International equity 4.5%, Fixed-income 43.6%, and Short-term 17.3%)
- UNIQUE Index Portfolio 2015 (Domestic equity 44.2%, International equity 7.8%, Fixed-income 38%, and Short-term 10%)
- UNIQUE Index Portfolio 2018 (Domestic equity 55.8%, International equity 9.8%, Fixed-income 30.7%, and Short-term 3.7%)
- UNIQUE Index Portfolio 2021 (Domestic equity 66.2%, International equity 11.7%, Fixed-income 22.1%)
- UNIQUE Index Portfolio 2024 (Domestic equity 77.3%, International equity 12.9%, Fixed-income 13.8%)
- UNIQUE Index Conservative Portfolio (Fixed-income 45.0%, and Short-term 55.0%)
- UNIQUE Index 70% Equity Portfolio (Domestic equity 60%, International equity 10%, Fixed-income 30%)
- UNIQUE Index 100% Equity Portfolio (Domestic equity 85%, International equity 15%)
- UNIQUE Intermediate Treasury Index Portfolio
- UNIQUE International Index Portfolio
- UNIQUE Spartan Index Portfolio
- UNIQUE Total Market Index Portfolio
As you can see from the above portfolio asset allocations, the far away the target date (2021 and 2024 for example), the more aggressive of the portfolio (nearly 80 to 90% in equity). The whole purpose of having most of the assets invested in equity, domestic plus international, is to catch the growth of equity at the early stage of the portfolio because over the long-term, equities have been proven to provide higher returns than fixed-income securities. As the target date gets close, assets are shifted to fix-incomes to preserve the portfolio values.
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[...] All UNIQUE portfolios are built with Fidelity mutual funds in four categories, domestic equity, international equity, fixed-income, and short-term funds. With UNIQUE plan, you can have two age-based options to invest your college-saving … Read more here [...]