Forecast for 2021: A few clouds giving way to sun

Vanguard recently released its economic forecast for 2021. In short, predictions trend upward with expectations for a gradual, yet perhaps uneven, recovery dependent largely on the success of the COVID-19 vaccines on the way.

But as the head of Education Savings at Vanguard and a mother of two young children, I combed through the expert analysis and research to understand what the outlook could mean for the education savings industry and individual savers as well.

What should investors hope to find in such an economic outlook? Perhaps that word “hope” says it best. I hoped to see that by “staying the course”―as Vanguard’s principles for investing success affirm―I continue to do the right thing. I haven’t stopped investing regularly for education, even when as 2020 markets plummeted and then bounced back at almost the same speed. And, as I’d also hoped, I’m not alone.

How America Invests research shows that most Vanguard investors stayed the course during the volatile first half of 2020. Only 22{79e59ee6e2f5cf570628ed7ac4055bef3419265de010b59461d891d43fac5627} of households traded, and of those, 62{79e59ee6e2f5cf570628ed7ac4055bef3419265de010b59461d891d43fac5627} moved assets into equities while less than 1{79e59ee6e2f5cf570628ed7ac4055bef3419265de010b59461d891d43fac5627} abandoned equities completely. The past year’s rebound in equity prices rewarded the many disciplined investors who remained “invested in the stock market despite troubling headlines.”*

Continuing on course

It’s good to know that the outlook for 2021 is positive, albeit modestly so. While economic conditions made it somewhat tempting to tamper with my asset allocation a few times this past year, my kids are still young, so I’m investing for the long term. I know it’s easier to predict the weather than it is to foresee market swings, and I’ve learned that an adjustment in how you’re investing should be based on changing goals or new time horizons—not market events.

To help me remain disciplined, I’m investing for college in The Vanguard 529 Plan’s Target Enrollment Portfolios—broadly diversified, low-cost portfolios, similar to the age-based options offered by many 529 education savings plans. Target Enrollment Portfolios automatically adjust their allocations for me and become more conservative as my child’s expected enrollment date draws near. Knowing that I have professional expertise taking care of the allocation adjustments necessary to help me meet my goals makes it far less inviting for me to make changes on my own.

And to further reduce the risk of market-timing, I’ve also made saving nearly effortless by setting up a plan for automatic recurring contributions. This way my saving continues on a schedule I choose, and I don’t have to do anything more than check my allocation annually to see that it still aligns with my time frame and goal.

A future focus

While I’m ready to take a deep breath, wipe my brow, and fondly bid 2020 goodbye, I’m grateful Vanguard’s thought leadership reinforced that my strategy of sticking to my long-term investment plan and ignoring market swings is the way to go.

It feels good to be confident in my investing plan and, as a parent, to have one less thing to worry about as I look forward to a happy new year! 

*Source: Vanguard Economic and Market Outlook for 2021: Approaching the Dawn (Joseph Davis, PhD, et al., 2020).

Notes:

All investing is subject to risk, including the possible loss of the money you invest.

There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

For more information about The Vanguard 529 College Savings Plan, obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.

If you are not a Nevada taxpayer, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

The Vanguard 529 College Savings Plan is a Nevada Trust administered by the office of the Nevada State Treasurer.

The Vanguard Group, Inc., serves as the Investment Manager for The Vanguard 529 College Savings Plan and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Ascensus Broker Dealer Services, LLC, serves as Program Manager and has overall responsibility for the day-to-day operations. The Plan’s portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed, and you could lose money by investing in the Plan.