Trump accounts, the new savings vehicle officially known as 530A accounts, will open to children under 18 starting July 4, and they come with a catch that deserves more attention than it has gotten: the money inside must stay in U.S. stocks until the child turns 18. No bonds, no international exposure, no diversification of any kind.
Why an All Stock Rule Is Riskier Than It Sounds
Since the mid 1920s, stocks have beaten bonds by a wide margin, averaging 5.5 annualized percentage points more in total return. That track record is why the all equity design of these accounts seems reasonable at first glance. But research from Edward McQuarrie, an emeritus professor at Santa Clara University, shows that this run is unusual by historical standards. Looking across the full sweep of U.S. history, stocks and bonds performed about the same for roughly the first two thirds of that timeline. The recent dominance of stocks is the exception, not a permanent law of markets.
McQuarrie's data on rolling 50 year periods makes the point sharply. Split American history into three roughly equal chunks. In the earliest third, stocks never beat bonds over any 50 year stretch. In the middle third, stocks won only about half the time. Only in the most recent third did stocks come out ahead in every single 50 year period. That pattern suggests the modern stock advantage, while real, is a relatively recent development rather than an eternal rule of investing.
What a Balanced Portfolio Would Have Delivered Instead
A 60/40 mix of stocks and bonds has actually held up well even during the decades when stocks were at their strongest. Since 1926, a portfolio rebalanced annually with 60% in the S&P 500 and 40% in long term U.S. Treasurys returned an average of 9.1% annualized across all 10 year periods. A portfolio fully invested in stocks returned 10.7% over the same stretches. That is a real gap, but it is smaller than many investors might assume, especially considering it came during one of the best eras in history for equities.
What This Means for Trump Account Rules
The 530A structure forces every dollar into U.S. equities for the full stretch of childhood, with no ability to shift toward bonds even as a hedge against a prolonged downturn. Financial commentators including Dave Ramsey and Vivian Tu have weighed in publicly on how families should think about these accounts, and the Treasury has issued guidance on where the money can actually be invested. For parents weighing whether to participate, the historical record is a reminder that a decade or two of pure stock exposure carries real risk of underperforming a mixed portfolio, even if the odds currently favor stocks over the long run.