STAYING POWER The grass is always greener in the other mutual fund, and investors are jumping funds 47% faster than they did four years ago. The average holding period is down from 5.5 years to 2.9. In the '90s, performance chasers poured $91 billion into funds after they peaked. Result: bad. Leapfroggers paid a 20% penalty in performance, says a recent study.
Cumulative returns in the '90s
1 year 2 year 3 year Average fund 11.7% 23.2% 36.5% Average investor 6.7% 14.7% 28.4%
Source: Financial Research Corp., based on 10 years' data
ARRIVAL TIME IS MONEY Amid last year's record flight delays, biztravel.com began compensating customers for jet lag on six airlines. The payout policy--$100 for 30-min. delays, $200 for an hour and a full refund after two--boosted sales 50%. But playing airline roulette has cost the site $1.7 million since May, so Biztravel recently shrank tardiness refunds 75%. (A $100 max is better than nothing.) Another plus? Automatic rebooking on cheaper flights so you can pocket the difference.
CATCH-22 New state-run college savings plans can hurt those who qualify for financial aid, says collegemoney.com These 529 plans treat withdrawals as student income, so gains are taxed at the child's low rate. But this jacks up the amount of money a family is required to pay for tuition, because a child's income is weighted more heavily than a parent's assets. Families in lower tax brackets might be better off with ordinary mutual funds.
--By Julie Rawe
College savings can cost financial aid
15% tax bracket 28% tax bracket 529 plan Mutual fund 529 plan Mutual fund
Tax savings $508 N/A $2,638 N/A
Financial aid lost $9,420 $2,136 $9,420 $2,008
Net loss to family $8,912 $2,136 $6,782 $2,008
Source: Journal of Financial Planning