The right college financing strategy may be one of the most important investment decisions you will make. What if you're not an investment professional?
We know most people aren't, so we've set up a choice of six investment options. You can invest new contributions in any one or combination of these six investment options: the Managed Allocation Option, 100% Equity Option, Balanced Option, 100% Fixed-Income Option, Money Market Option and the Guaranteed Option.
Effective November 1, 2007, transfers from the Guaranteed Option to the Money Market Option will not be permitted. (If this restriction changes, investors will be notified prior to the effective date of any such change.)
These investment options vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that may fit your needs.
Changing Your Investments
Once you invest in a particular investment option, you can transfer contributions and any earnings to another investment option once per calendar year or upon a transfer of funds to a Minnesota College Savings Plan account for a different beneficiary. Effective November 1, 2007, transfers (including transfers when there is a change of the Beneficiary) from the Guaranteed Option to the Money Market Option will not be permitted. (If this restriction changes, investors will be notified prior to the effective date of any such change.) (See the Minnesota College Savings Plan Disclosure Booklet and Participation Agreements (PDF, 773KB) for more information.)
Periodically Review Your Investments
It's a good idea to periodically re-evaluate your investment strategy as your goals, investment horizon, and personal situation change - for example, annually at tax time, on a yearly basis if your income changes, or upon the birth of another child.
Managed Allocation Option
The right investment strategy for college expenses can be complex. That is why the Managed Allocation Option is the core investment for the Minnesota College Savings Plan. Investing in the Managed Allocation Option follows the time-tested method of using the number of years an investor has for saving to determine the appropriate mix of investments. The Managed Allocation Option is the core investment for the Minnesota College Savings Plan. The managed allocation option is designed to seek returns that exceed inflation while preserving principal.
Managed Allocation investment portfolios are based on your beneficiary's age and combine equity, real estate, fixed income, and money market mutual funds offered by the TIAA-CREF Funds - Institutional Class. Younger beneficiaries have a higher exposure to equities and real estate investments, which decrease significantly as they approach the age of college attendance, as the charts below illustrate.
Investor Profile
Because the Managed Allocation Option provides a balanced and diversified investment, many Account Owners may elect this option as their single choice for investing with the potential to achieve long-term growth. This option is best for an investor who can invest in the Plan long-term, but can tolerate some level or risk.
Allocations for all investments are as of September 2007. Allocations are reviewed and adjusted periodically.
100% Equity Option
The 100% Equity Option invests your contributions, together with any return on your contributions, among a combination of mutual funds that include domestic and international equities, as well as real estate securities. This investment option has the potential to produce above-average returns over the long term, but given the higher volatility of this option, the risk of loss is greater, particularly for families with a short time to save for college. Unlike the Managed Allocation Option where the allocation changes as your beneficiary approaches the age when he/she would generally be expected to enroll in an eligible educational institution, the 100% Equity Option will not be changed to reflect the age of beneficiary.
Investor Profile
Although stocks can produce above-average long-term returns, they do not perform well in every type of market. For that reason, the 100% Equity Option is not for everyone. It may be a good choice for you if you can tolerate greater risk and volatility with some of your contributions in exchange for higher potential returns over time. It may be appropriate if you already have substantial college savings from less volatile investments (e.g., fixed-income), if you have a longer time horizon, or if you want a balanced account by combining this with the more conservative Guaranteed Option or the Managed Allocation Option.
Balanced Option
Contributions to the Balanced Option together with any return on your contributions, are allocated among a combination of mutual funds that invest in equities, real estate securities, and fixed-income investments. Unlike the Managed Allocation Option where the allocation changes as the beneficiary approaches the age when he/she would generally be expected to enroll in an eligible educational institution, the Balanced Option will not be changed to reflect the age of the beneficiary.
Investor Profile
The Balanced Option balances investments in equity and real estate securities, which have the potential to produce above-average long-term returns, with fixed-income investments to help reduce the risk of volatility typically associated with investing in the equity and real estate securities markets. This investment option provides investors with the opportunity for current income and capital appreciation by allocating contributions and corresponding investment returns, if any, across several asset classes, such as stocks, bonds, and real estate securities.
100% Fixed-Income Option
Under the 100% Fixed-Income Option, your contributions, together with any return on your contributions, are allocated among a combination of mutual funds that invest in conventional and inflation-linked bonds. Unlike the Managed Allocation Option where the allocation changes as your beneficiary approaches the age when he/she would generally be expected to enroll in an eligible educational institution, the 100% Fixed-Income Option will not be changed to reflect the age of the beneficiary.
Investor Profile
The 100% Fixed-Income Option is designed for Account Owners who are willing and able to accept some volatility in returns in an attempt to achieve a long-term rate of return potentially higher than offered through less volatile investments, such as the Guaranteed Option or the Money Market Option. It may not be appropriate as an investor's only investment for college savings, but may provide a useful means by which to obtain incremental exposure to fixed-income investments as part of an overall college savings strategy. This Investment Option may serve as a useful complement to other Plan Investment Options because of the historically low correlation between the returns of bonds, such as conventional and inflation-linked bonds, and other asset classes, such as equity and real estate securities. The 100% Fixed-Income Option may help Account Owners achieve higher returns with less volatility during periods of comparatively low performance of equities and real estate securities.
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Money Market Option
The Money Market Option seeks to provide stability of principal by allocating 100% of contributions, together with any return of your contributions, to the TIAA-CREF Money Market Fund. Unlike the Managed Allocation Option where the allocation changes as your beneficiary approaches the age when he/she would generally be expected to enroll in an eligible educational institution, the Money Market Option will not be changed to reflect the age of the beneficiary. The Money Market Option is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other federal or state government agency.
Investor Profile
The Money Market Option may be appropriate for conservative investors who are looking for a high degree of principal stability and liquidity, and are willing to accept returns that may be lower than those offered by longer-term fixed-income investments. This investment option is designed to provide account owners with current money market returns, while striving to maintain the goal of preserving capital and providing a degree of protection from inflation.
Guaranteed Option
Your contributions to the Guaranteed Option will be allocated to a Funding Agreement that guarantees the Minnesota College Savings Plan both principal and a minimum annual interest rate of 3%, with the opportunity for additional returns beyond the minimum rate. This option provides additional safety and security that many people want for a portion of their college investment. The Guaranteed Option provides a guarantee of principal and a minimum rate of interest to the Minnesota Board of Investment, but not to the account owners or beneficiaries. The guarantee to the Minnesota College Savings Plan is subject to the claims paying ability of the TIAA-CREF Life Insurance Company. Effective November 1, 2007, transfers from the Guaranteed Option to the Money Market will not be permitted. (If this restriction changes, you will be notified prior to the effective date of any such change.)
Effective April 1, 2008, contributions received, and accumulations arising from such contributions, under the Funding Agreement for the Guaranteed Option as of March 31, 2008 will be credited to the Minnesota State Board of Investment (on behalf of the Minnesota Office of Higher Education) with an effective annual interest rate of 3.25% and are guaranteed to earn this rate through March 31, 2009, subject to the claims paying ability of TIAA-CREF Life. The Board (on behalf of the Office) will be credited with Minnesota State Board of Investment (on behalf of the Minnesota Office of Higher Education) an effective annual interest rate of 3.25% on contributions received, and accumulations arising from such contributions, under the Funding Agreement for the Guaranteed Option from April 1, 2008 until further notice, and are guaranteed to earn this rate through March 31, 2009, subject to the claims paying ability of TIAA-CREF Life Insurance Company.
Investor Profile
The Guaranteed Option provides the stability that many people may want for at least a portion of their college savings funds. It provides an investment option to investors who can tolerate little risk, including those who have traditionally saved using fixed-income vehicles are are willing to accept returns that may be lower than those offered by the other investment options. In addition, investors with shorter investment time frames may find this option appealing as will investors who want a balanced account by combining this option with a more aggressive option (i.e., the Managed Allocation Option or the 100% Equity Option).
The investment approaches described are not recommendations and do not take into consideration personal goals or preferences. After evaluating information you consider important in making an investment choice, the ultimate decision is up to you. It is a good idea to revisit your investment strategy periodically as your goals, personal financial situation, and market conditions change.
Underlying TIAA-CREF Funds - Institutional Class
Following is the list of underlying Institutional Class Shares of the TIAA-CREF Funds -Institutional Class:
- International Equity Fund
- Large-Cap Growth Index Fund
- Large-Cap Value Index Fund
- Mid-Cap Growth Index Fund
- Mid-Cap Value Index Fund
- Equity Index Fund
- S&P 500 Index Fund
- Small-Cap Blend Index Fund
- Real Estate Securities Fund
- Bond Fund
- Inflation-Linked Bond Fund
- Money Market Fund
Please read the prospectus for the Institutional Class Shares of the TIAA-CREF Funds -Institutional Class before investing. However, keep in mind that an investment in the Minnesota College Savings Plan is not the same as a direct investment in the underlying mutual funds.
The TIAA-CREF Institutional Money Market Fund is not insured or guaranteed by the federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to maintain a stable net asset value of $1.00 per share, you can lose money by investing.
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