The most informative 529 plan site online –

by Evan on September 28, 2009

I have posted a link on my resources page for the most informative website that I am familiar with regarding college savings plans, or 529 plans. allows users to compare state college 529 savings plans side by side and through a comprehensive 5 cap rating system.

Depending on an individual’s need, there are several state 529 plans that are worth looking at here in Texas. Since our state does not have an income tax, you can feel free to choose the best plan from any state offered on the website. There is no tax benefit for Texas residents to use the Texas 529 plan. Some of the plans that I have used under different circumstances are the Nevada Vanguard 529 Savings Plan, the Ohio CollegeAdvantage 529 Savings Plan, the Utah Educational Savings Plan Trust, and the Virginia Education Savings Trust (VEST). Each one uses primarily Vanguard funds, which allows for the owner to minimize costs and obtain broadly diversified index funds. Make sure to check into the costs associated with maintaining the 529 plan along with the actual investment costs. For instance, the Utah plan charges a fee each year to maintain the account, while the Ohio plan does not. However, be sure to select the most appropriate investment vehicle, also. I have chosen the Utah plan over other plans in the past for larger accounts because of the flexibility of investments and the overall expense ratios of the underlying funds being lower.

Be sure to check out all of this by linking to and then click on 5 Cap Ratings. As always, feel free to contact me for additional help!

Target Date Funds – Why I do not like them

by Evan on September 26, 2009

I have never been a proponent of target date funds. Let me explain why in this blog entry.

When you purchase a target date fund you buy into a mutual fund that holds other mutual funds. Sound complicated? It is! The underlying funds are supposed to be placed into each target date fund based upon a specified target future date (ie 2010, 2015, 2020) that corresponds to the investors approximate date of retirement.

Here are the three reasons I do not like these funds:

1.) Each individual has different risk tolerances or ability to handle the ups and downs in the markets. These target date funds are generic both in content and risk for a specified age grouping. This means that if you want to be highly aggressive, not the norm, the target date funds will not work for you.

2.) Recently, during the market down turn of 2007-2009, target date funds developed for very conservative investors lost a great deal of their investment! It was not uncommon to have people who were 55-60 years of age that lost 25-30% of the target date funds value in under 12 months. These funds are flawed with respect to making assumptions about future growth based upon past growth rates. Thus, if the growth rate going forward is lower than the established historical growth rates, as I think they are, the target date funds will take on more risk for each amount of potential return.

3.) There is something called cash drag. Cash drag is related to the amount of cash that is held in each mutual fund that the target date fund invests in. Without looking at each individual fund to find out how much cash is held, the investor never knows how much is truly invested in the market versus cash. So even though the target date fund might try to replicate a 60% equities/30% bonds/10% cash strategy, the underlying funds may “drag” the total % of cash out to be something like 13%. Thus, you think that you are investing in a 60%/30%/10% but you are really invested in a 57%/30%/13% fund instead. Over time, this affects investment return and exposes the investor to additional inflation risk.

In closing, there are better options for investors in the investment universe.

Ethical Advisor Launched

by Evan on September 23, 2009

Hello, and welcome to The Ethical Advisor website This is an exciting day for the business, as it is the worldwide debut on the internet. was created to help its client base by having a single point of contact on the web for the latest financial ideas via financial blogging via the company’s founder, Evan Peterson.  Please be sure to check back often for information about the company, blog updates, and other important information!