New York’s 529 College Savings Program Adds International Fund To The Direct Plan

By Pinyo, on March 26, 2009

I am thrilled with the announcement made by the New York’s 529 College Savings Program today. They finally decided to add an international investment option to their 529 Direct Plan. This new investment is called the Developed Markets Index Portfolio, which invest 100% in Vanguard Institutional Developed Markets Index Fund.

I think this is a really good news because this represents the first time that New York’s 529 Plan participants can diversify beyond U.S. domestic investments. As soon as I got this notification, I changed my 529 Plan asset allocation to the following:

You can see the summary of latest changes at www.ny529plansaves.com.

Why International Portfolio Diversification Is Good

To answer this question, I will quote Larry Swedroe from his excellent book, The Only Guide to Alternative Investments You’ll Ever Need:

Investing in international stocks, while providing expected returns similar to those of domestic stocks, provides the benefit of diversifying the economic and political risk of domestic investing. Thus, the gains from international diversification come from the relatively low correlation among international securities. This is especially important for those who are employed in the United States, as it is likely that their intellectual capital is highly correlated with domestic risks.

As far as how much should we invest in international equities, it seems that there are a lot of opinion on this subject. However, I tend to side with Larry’s advice of having at least 30% and up to 50% of your portfolio in international investments.

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Pinyo is the brain behind Moolanomy personal finance blog and a few other web sites. If you like this article, please subscribe for free daily email updates.

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