31% of college savers are wrong about this rule

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529 plans are a great way for families to save for college. They're easy to use and offer tax-free investment growth and tax-free withdrawals when the money is used to pay for higher education. And depending on where you live, you may also be able to claim a state tax credit or deduction for contributions. You can enroll in a 529 account by completing a form on the plan's website, visiting Savingforcollege.com or through a financial advisor.

Sounds easy-peasy, right? It is, but you have to remember that a 529 college savings plan is an investment account, which means its value will fluctuate based on stock market conditions. And with hundreds of different options available, choosing the best investment strategy for your family can sometimes be challenging. We recently surveyed over 300 college savers and found out that many are still unsure about some important rules regarding 529 plan investing.

RELATED: 5 simple steps to enrolling in a 529 plan

Selecting investment options

When you enroll in a 529 plan you typically select an investment option from a list of static or age-based options. Static investment options contain portfolios made up of specific types of investments such as fixed income, equities (stocks) or cash. If you choose a static option, the investments will remain the same throughout the life of the account unless you (the account owner) manually make a change. But with an age-based option your investments will shift automatically as the beneficiary gets closer to college. As a general rule of thumb, when your child is young your portfolio should be more heavily weighted toward equities, and as they grow you should start to move toward less risky fixed income investments.

The investment option you choose can have a big impact on your savings, but our survey shows there are some families who might not realize this. In fact, 21 percent of respondents who currently use a 529 plan said that they weren't sure which investment option they selected when they enrolled in the plan. What's more, 75 percent of college savers who were not enrolled in a 529 plan said they weren't sure which option they would select if they were to open one.

To find out more information on a specific plan's investment options, you can visit the plan's website or it's detail page on Savingforcollege.com.

RELATED: Selecting your 529 plan investment options

Reviewing investment performance

Even if you're confident about the investment options you've selected, you should still regularly monitor your plan's investment performance. Your plan may have been performing relatively well when you enrolled, but how does it look today? To review your 529 plan, you can look at the performance figures published by the administrator or simply look at the growth of the account over certain time periods. You can compare your plan's performance with your retirement accounts, other investments or market indices, or see how it stacks up against the competition in Savingforcollege.com's quarterly performance rankings.

But keep in mind that past performance doesn't always predict what will happen in the future. And if your plan's performance drops but is still in line with the market, it might be a good idea to keep making regular contributions to advantage of the Dollar-Cost Averaging strategy.

According to our survey, most families who use 529 plans review their investment performance annually (33%) or semi-annually (33%). 17 percent review performance monthly and 12 percent say they never review investment performance.

RELATED: 5 ways to judge your 529 plan's investment performance

Changing investment options

There are a couple of different reasons why you might want to change investment options. Maybe you've been keeping an eye on your plan's quarterly performance and noticed a downward trend. Or perhaps you selected the static option when you enrolled and it's time to make adjustments. For example, if your child was a baby or very young when you began saving in your 529 plan, you likely chose an option that was heavily weighted toward equities. While equities offer greater return potential, they are also more risky investments. As your child gets closer to college, you'll want to make sure you switch to a more conservative option containing fixed income investments.

You can change investment options in your 529 plan twice in any calendar year, but the majority of families saving for college aren't aware of this rule. In fact, 31 percent of families who have 529 plans believe they can change their investment options whenever they want, 12 percent think they can switch investments once a year and 45 percent admit that they don't know. What's more, 34 percent of families who have 529 plans (and 66% of families who don't have 529 plans) have no idea which type of investment is most appropriate for a student who is starting college soon. For these families, an age-based investment option may be the best choice since it will be programmed to change investments automatically over time.

RELATED: 5 ways to tell if you're using the wrong 529 plan