Waddell & Reed Launches 529 Plan

October 2, 2001 (PLANSPONSOR.com) - Waddell & Reed, Inc launched its version of the 529 college savings plan, the Waddell & Reed InvestEd Plan, a tax-deferred method of saving for post-secondary education.

The plan, available through Waddell & Reed financial advisors, was established under the Arizona Family College Savings Program, created by the state of Arizona as a qualified state tuition program in accordance with Section 529 of the Internal Revenue Code.

Investments in 529 plans grow tax-deferred until withdrawn, and from 2002, when assets are withdrawn for qualified higher education expenses such as tuition, room and board or books, the earnings will be federal income tax free.

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Further, unlike Uniform Transfer to Minor accounts, the account owner retains control after the beneficiary reaches legal age, ensuring that the money saved is used for education expenses.

Portfolios

The plan?s portfolios have been organized as a fund of funds and are customized based on the beneficiary’s college time horizon and the appropriate level of investment risk for that time horizon, specifically:

  • a greater exposure to equity investments when the beneficiary is between ages 0 and 8,
  • a more balanced exposure to equity and fixed income investments when the beneficiary is between ages 9 and 15, and
  • a greater exposure to fixed income funds when the beneficiary reaches age 16.

Account owners can opt-out of the above sequence and choose to remain in one of the three portfolios for the life of the account if desired, although such election would be irrevocable and the account owner would have to remain invested in the selected portfolio until withdrawn.

ETFs Expand Rapidly in 2000

February 9, 2001 (PLANSPONSOR.com) - Exchange-traded funds, or ETFs, totaled $65.6 billion at the end of 2000, according to the Investment Company Institute (ICI) which has begun tracking monthly ETF statistics.

Investors have welcomed the “new” investment class, which generally offers more trading flexibility and lower expense ratios than comparable mutual funds.  The first ETFs began trading on the American Stock Exchange in 1993,     

An exchange-traded fund is an investment company with shares that trade intraday on stock exchanges at market-determined prices, as do stocks.

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However, at year-end 2000, total ETF assets were a mere fraction of the $6.9 trillion invested in mutual funds.

Type Cast

At 12/31 there were 80 ETFs trading on U.S. stock exchanges, up from 30 at the beginning of the year.

Fifty-five ETFs totaling $63.5 billion tracked domestic stock indexes.  Twenty-eight used broad indexes, while 27 targeted industry or sector indexes.

Twenty-five ETFs were classified as Global/International

The Investment Company Institute offers frequently asked questions about ETFs at http://www.ici.org/aboutfunds/etf_faqs.htm .

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