Efficient Portfolios for Saving for College
Hanna, S. & Chen, P. (1995). Efficient Portfolios for Saving for College, Proceedings of the
Association for Financial Counseling and Planning Education, 82-92.
This paper uses 69 years of real rates of return for six types of financial assets to find efficient
portfolios for saving for college, in terms of mean and minimum accumulations. Small stocks
are in every efficient portfolio. For 10 and 15 year time frames, the portfolio with the best worst
case scenario consists of 89% intermediate term government bonds and 11% small stocks. A
family willing to stay 100% invested in small stock mutual funds until each year’s college costs
must be met can greatly reduce the burden of saving for college, at relatively low risk.
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