Morningstar Advisor - June/July 2011 - (Page 42)

Spotlight Morningstar Grades 529 Plans The 529 landscape is abundantly complicated, with nearly every state offering its own plan and different tax breaks. Morningstar’s research has sought to simplify the decisions investors need to make. We rate 54 of the nation’s 82 529 college-savings plans, covering more than 90% of the industry’s assets. We made sure to review the largest plans but also picked plans run by well-known program managers and a few smaller, innovative plans. In assigning our qualitative ratings, we considered a plan’s asset allocations, underlying investments, performance, fees, stewardship practices, tax incentives, and quality of the program manager. Investors face a challenging decision of whether to invest in-state or out-of-state. They should stay in-state if their home state plan earns a Top or Above Average rating and the tax incentives are good. Investors who live in states with tax parity—where state income-tax benefits apply to out-of-state plans—or no state income tax should jump straight to the best nationally offered plans. If their state offers poorly rated choices and weak tax benefits, then they should also consider Top-rated plans. Plans that earn Top and Above Average ratings are in green. Issuing State Name Morningstar Analyst Rating Sales Channel Number of Age-Based Tracks Number of Static Portfolios Asset-Weighted Total Expense Ratio (11/1/10) Tax Incentive Level* Tax Parity Alabama Alaska CollegeCounts 529 Fund John Hancock Freedom 529 T. Rowe Price College Savings Plan University of Alaska Coll Savings Plan InvestEd 529 Education Savings Plan Fidelity Arizona College Savings Plan iShares 529 Plan GIFT College Investing Plan ScholarShare College Savings Plan ScholarShare Advisor Coll Savings Plan CollegeInvest Direct Portfolio Scholars Choice College Savings Program Connecticut Higher Education Trust CHET Advisor College Savings Plan Delaware College Investment Plan Florida College Investment Plan Path2College 529 Plan HI529 - Hawaii’s College Savings Program IDeal - Idaho College Savings Program Bright Directions Coll Savings Program Bright Start College Savings (Direct) Bright Start Coll Savings (Advisor) CollegeChoice 529 Direct Savings Plan CollegeChoice Advisor 529 Savings Plan College Savings Iowa 529 Plan Iowa Advisor 529 Plan LearningQuest 529 Program (Direct) Schwab 529 College Savings Plan LearningQuest 529 Program (Advisor) Kentucky Education Savings Plan Trust NextGen College Investing Plan Maryland College Investment Plan U.Fund College Investing Plan Michigan Education Savings Program MI 529 Advisor Average Above Average Top — Average — Above Average — Average — Above Average Average Average — Average — Below Average — — Above Average Above Average Average Average — Above Average — Above Average Average — — Above Average Top Average Above Average — Advisor/Direct Advisor Direct Direct Advisor Direct Advisor Direct Direct Advisor Direct Advisor Direct Advisor Direct Direct Direct Direct Direct Advisor Direct Advisor Direct Advisor Direct Advisor Direct Direct Advisor Direct Advisor/Direct Direct Direct Direct Advisor 3 1 1 1 1 2 1 3 2 1 3 2 3 1 2 1 2 1 3 3 2 1 1 1 4 0 4 4 3 1 5 1 2 3 1 125 50 6 6 20 12 13 6 13 60 8 36 8 51 12 4 5 6 6 168 7 16 8 21 9 32 17 7 55 5 74 6 12 5 28 — 1.70 0.82 — 1.09 0.65 0.62 0.75 0.37 — 0.42 1.26 0.51 — 0.75 0.75 0.57 0.75 0.85 1.35 0.46 0.86 0.51 1.18 0.34 1.75 0.72 1.19 1.53 0.57 1.76 0.84 0.78 0.40 1.61 Medium None None None Low Low Medium Medium None None High High Medium Medium None None Low None Low Medium Medium Medium Low Low Low Low Low Low Low None Low Low None Medium Medium No No No No Yes Yes No No No No No No No No No No No No No No No No No No No No Yes Yes Yes No Yes No No No No Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Maine Maryland Massachusetts Michigan 42 Morningstar Advisor June/July 2011

Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2011

Morningstar Advisor - June/July 2011
Letter From the Editor
Questions for the Secret Society
Are 529 Plans a Useful Tool for Clients’ College-Savings Goals?
Taking the Lead
How to Sell Covered Calls
The College-Savings Challenge
Time to Play Defense?
Four Picks for the Present
Investment Briefs
Careful What You Wish For
Caution in Utilities After Japan Crisis
Blossoms and Thorns in the 529 Garden
Lower Fees, Competitive Returns Help More 529s Make the Grade
Morningstar Grades 529 Plans
529 Risks Include the Political
Researching 529 Plans Made Easy
How Closed-End Funds Are Born
Boutique Within a Bank
The Inefficient Pricing of Moats
More Steak Than Sizzle
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Dangers of Demonizing

Morningstar Advisor - June/July 2011