How would you find the beta of a 529 plan, for example California’s plan, ScholarShare 529?

Expert Solution

529 plan is an education plan which is basically focused at tax exemptions and one need to invest in these plans to get the tax exemptions and these 529 plans are often embedded with various mutual fund houses like Vanguard provides with 529 plan which is embedded with the Vanguard 500 index funds and it is generally a passive investment so it is often having a market beta of 1, because it is just replicating the rate of return of the standard and poor 500 so we will have to consider the type of the plan and the structure of the plan & it can either be active or passive.

529 plans investments are specific in nature and if they are investing into multiple companies which are having high beta, then we will have to calculate the beta of the portfolio and accordingly we will have to adjust the beta but if they are having passive investment like when Vanguard, then we will be taking the beat of 1 as it will be e replicating the rate of return of the index.

Hence, Beta of these 529 plans are specific in nature according to the shares they are holding and sensitiveness to Maket index.

jeff jeffy answered 2 years ago

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