JUST 48 MILES LONG

and 37 miles wide, Rhode Island is the smallest state in the Union a thumb-tack, barely, on the northeast corner of the map.

But on the college-savings front, it easily stands out. With more than $7.6 billion in assets as of year-end 2006, Rhode Island's 529 Savings Plan the CollegeBoundfund managed by AllianceBernstein is the second-largest 529 plan in the country, claiming nearly $1 of every $10 saved up so far in these increasingly popularFor a quick tutorial on the basics of 529 Savings Plans, click here

To be sure, that's likely a result of the sales efforts of investment advisors nationwide: outside of Rhode Island, the only way to invest in the plan is through an advisor. But despite the sales commissions up to 4.25% upfront or a maximum 4% on the back end, depending on the share class the plan has yet to disappoint. Even factoring in the maximum sales load paid by investors, it beat all other advisor-sold and many direct-sold 529 plans over the past three years, according to the latest performance rankings by Savingforcollege.com, an online resource run by 529 plan expert Joe Hurley. (It also came out ahead in five-year rankings, but many states' plans don't have long enough histories to make a fair comparison.)

So is it worth it to pay a load something we rarely, if ever, recommend just to get into what looks like the best 529 plan out there? The answer may be "yes" for some investors. But keep in mind: most direct-sold funds still tend to outperform advisor-sold funds, once commissions come into the mix. You need to do your homework to find out if a load makes sense for you.

Choosing a 529 plan is a complicated affair and professional advice comes in handy. (Nearly 80% of 529 plan sales are conducted through an advisor, according to the Financial Research Corporation, an industry research group.) And while many states offer tax benefits to their residents if they invest in their home state's plan, making it a good place to start, 529 plans still differ substantially in terms of costs, underlying investment options and, ultimately, returns.

In some cases, the lag on average returns has been large enough to make that load appear worthwhile. Take one of Arizona's 529 programs: the direct-sold Family College Savings Program managed by Securities Management & Research (SM&R) returned an average 8.28% on its 100% equity portfolio over the last three years ending September 30, according to Savingforcollege.com. At the same time, AllianceBernstein's advisor-sold 100% equity portfolios averaged almost double returns, 15.06% annually, after factoring in the maximum sales load. (SM&R's contract with the state expired in November 2006 and was not renewed.)

But judging a plan by its returns alone is a mistake, warns Kerry O'Boyle, an analyst at investment research firm Morningstar. "It's dangerous to look at performance when you don't know what's in the portfolio that's driving that performance," he says. And here's the key: what's in one state's 529 program can be entirely different from another's. "It does amaze me sometimes how different they can be in terms of asset allocation, diversification, and the underlying investment options that they use," O'Boyle says.

Here's what to look for when choosing a 529 savings plan.

What's inside the asset allocation portfolios?

As with retirement savings, target-date portfolios are becoming one of the most popular savings options in 529 plans. Every state except Montana now offers at least one plan that has age-based portfolios, according to Savingsforcollege.com's Hurley. That's good news for parents who don't have the time or willingness to tinker with their portfolios: asset allocation automatically changes from aggressive when you start out to more conservative as your child gets closer to college age.

But just how aggressive to start out and how soon to shift to more conservative gear differs widely among plans, says Robert Shipley, CEO of 529 Plan Solutions, an industry research firm. "Some plans start 100% in equities, others start with 80%, or even 60% for a newborn," he says.

Which one should you choose? Depends on whom you ask.

Thomas Fontaine, a senior portfolio manager at AllianceBernstein, upholds the same investment principles to college savings as with retirement: if you're investing for a newborn, you should take a strong equity position because your investment horizon is long enough to make up for any short term market losses. Its aggressive portfolio starts out an infant with 100% stocks and gradually shifts to an allocation of 40% stocks, 55% bonds and 5% cash.

Compare this with Kansas' notably more conservative Schwab 529 College Savings Plan, which by the time your child turns 15 invests 100% of its age-based assets in bonds and cash, according to Morningstar. (In terms of average three-year returns, the plan ranked 14th of 32 plans with three-year records.)

Given both extremes AllianceBernstein's 40%-equity portfolio at college age and Schwab's all-income Morningstar's O'Boyle prefers the middle ground of T. Rowe Price's portfolios. The fund company, which manages the University of Alaska College Savings Plan and its identical T. Rowe Price College Savings Plan available nationwide, starts out a newborn in equities entirely, but gradually winds down to a portfolio of 20% stocks, 40% bonds and 40% cash and short-term bonds. Over the past three years, Alaska's plan was a top performer among direct-sold plans in Hurley's rankings.

What about diversification?

Proper diversification is the key to staving off investment risk, but not all 529 plans do a good job at it, according to O'Boyle. "Plans seem to be all over the map in terms of how much they allocate to small- and mid-cap stocks," he says. "International stocks can go anywhere from 0% to 20%. If you don't have that exposure, you're always waiting for U.S. large-caps to perform well."

The most striking example can be found in one of the largest and lowest-cost plans in the country, New York's Vanguard-managed 529 College Savings Program. Because of state-imposed investment restrictions (the plan is governed by the state's pension laws), none of its portfolios currently hold international equities. "We hope that will change in the next six months," says John Heywood, a principal at Vanguard. But in the meantime, he concedes, the plan has been missing out on the added diversification of international equities, which he pinpoints should be between 15% and 25% of a portfolio. And given international equities' hot run over the past few years, it's no wonder the plan's performance has lagged: last year, it ranked 42 out of 48 direct-sold plans based on one-year returns. (The plan did not have at least three portfolios with a three-year history to be ranked based on three-year returns.) Meanwhile, Utah's 529 plan, which also uses exclusively Vanguard funds, including the Vanguard International Value Fund and the Vanguard International Growth Fund in its portfolios, is one of the top five best-performing plans nationwide.

Rules, regulations and other considerations

Investment philosophy, costs and diversification aside, a state's 529 plan rules and regulations shouldn't be overlooked, says Peter Mazareas, who has helped start about 20 programs in various states and is now treasurer of the College Savings Foundation, an industry group.

Some states, for example, limit total account balances while others limit the amount of total account contributions. These limits can also vary by as much as $100,000. (Granted, limits generally exceed $220,000, so that shouldn't be an issue for most parents. But if you're hoping to send your kid off to medical school and pay for it a lower limit may be a problem.)

Some states' plans mandate that non-qualified distributions from the account meaning you don't use them for educational expense, when they're tax-free be taxed as the parent's income, not the child's. Others allow either. To review a state's general 529 regulations, use Joe Hurley's 529 plan database here.