Daniel Ades, founder of Kawa Capital Management, is an expert in the $242 billion market for bonds backed by bundles of student loans.
He has delivered consistently strong returns by trading hundreds of millions of dollars worth of the debt over the past four years. The trick is accurately predicting young people’s ability to pay their loans.
In this fascinating WSJ story, “Generation Jobless: What Hedge Funds Can Teach College Students,” Ades says students should pick schools where the payoff from higher salaries upon graduation exceeds the cost of the education by the widest margin, especially when the job market contracts.
Technical colleges, then, come out on top. And what about Law School?
WSJ’s Matt Wirtz writes:
Law school, on the other hand, can end up a sucker’s bet in periods of high unemployment, experts in student loan-backed bonds say.
While college students often enroll in professional programs to wait out economic soft patches, the U.S. has far more law schools than other professional schools, resulting in an excess supply of lawyers, said investors and analysts. In recessions, law school graduates have a harder time finding work than other graduates from professional programs and are more likely to default on their student loans.
Nevertheless, law students have been willing to take on even more debt for their degrees, borrowing a record $68,827 on average to attend public universities this year and $106,249 for private educations, according to the American Bar Association.
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Reinvesting Dividends: Hedge Funds Love These High-Yield Stocks
When investors purchase shares of dividend-yielding stocks, they are given the opportunity to receive the dividends or have them reinvested. Simply purchase a stock and you can watch your portfolio slowly accumulate even more shares over the course of several years.
Reinvesting dividends is often considered a good move as it capitalizes off compounded interest, but as with most investment strategies, there's a potential downside to consider.
