Investing to fund education
Published: Sunday | March 22, 2009
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Graduation ceremony at the Montego Bay Community College.
I am planning to pursue further studies next year and I would want to self- finance my education. After all my expenses are deducted on a monthly basis, I have about $10,000 remaining. The present cost of the course is US$5,000 per annum and the course is for three years.
My salary and expenses are as follows:
Income: $62,000
Expenses:
Total - $51,800
What can I invest in to get the highest return given the limited funds available? I wish to begin school in 2010.
I welcome your advice and thank you in advance for same.
- Dor
Costly long-term investment
Education is a great but costly long-term investment which requires long-term planning and a steady, reliable flow of funds.
In your case, you have recognised that it is sometimes necessary to use borrowed funds as you are now repaying a loan to the Students' Loan Bureau. Although you have indicated that you want to fund the next phase of your education with your own resources, you have not indicated what level of savings and investments you have been able to accumulate so far.
If you are to achieve that goal, it goes without saying that you must already have a sizeable pool of funds to cover the cost of your schooling over the expected three years of the course. In such a scenario, it would be reasonable to expect you to fund your schooling from the income generated from your investments or to use your income and some of the investments to do so.
At current interest-rate levels and considering that taxes would reduce your returns by 25 per cent, you would need almost $4 million to generate the annual income required to fund the approximately $450,000 annual cost of your education using the first approach mentioned above.
But this is out of the question because you have stated that your funds are limited. In any event, even with a sizeable portfolio, current yields cannot reasonably be expected to last long; these interest-rate levels will decline before long.
Although you have not said so, it appears you will be working during the course of the study programme you are contemplating. If that is not the case, then you would be in a very difficult situation meeting all of your other commitments and funding your education.
Protecting your investments
If you are thinking of any investment that will give you mind-boggling yields, I am not in a position to help. Whatever the size of your portfolio, you need to protect its value at all costs. High returns mean high risks; high returns and low risk are not bed fellows.
For your purposes and considering what I just said, I would not recommend stocks to you even in a strong market. The stock market is anything but strong now anyway. As for what have commonly been known as alternative investment schemes, you are aware of how real they have turned out to be!
From the figures you have provided, you save $5,000 per month and generate a monthly budget surplus of $10,000. If you are really keen on furthering your studies, thereby strengthening your position in the job market, another loan may just be the answer. Are you prepared to go that route?
Limited funds
Considering that your funds are limited and that you have a preference for using your own resources to fund the next phase of your education, it does not seem that you would be able to begin school in 2010. I do not see you earning the required investment returns to make that possible.
finviser.jm@gmail.com
