Benefits and risks of investing in education stocks
Here are some of the biggest benefits of investing in education stocks with your portfolio:
- Education is an essential service. There's always demand for it in some form, even if the type of education people look for changes.
- There's a wide range of businesses available, including education technology companies, career training schools, and academic publishers.
- Many educational stocks have stable or growing revenue, with enrollment rates either maintained or improved each year.
However, the education sector also presents unique risks:
- It can be challenging to predict which educational fields will be in the highest demand, as evidenced by declining university enrollment rates.
- Educational technology companies, while exciting, often trade at high valuations.
- For-profit colleges have a controversial reputation, and some have been the subject of regulatory scrutiny and lawsuits.
Methodology: How these stocks were chosen
The selection criteria for this list include durable competitive advantages, financial strength, and growing enrollment or engagement numbers. For universities and education service companies, the number of total students and new students were among the most important factors. For educational apps, the number of daily active users and paid subscribers was crucial.
The education sector is changing, with increasing demand for skills training, online learning, and AI-powered learning solutions. The companies on this list are at the forefront of areas primed for long-term growth, including career training programs, trade schools, and educational apps.
Should you invest in education stocks?
Education stocks are worth considering for your portfolio, as they provide a service in consistently high demand. That said, the type of education people seek can change over time, as seen in the recent growth of trade schools and the decline in university enrollment.
AI is also disrupting the education sector by making it easier to access personalized instruction across a wide range of subjects at little to no cost. If you decide to invest in education stocks, make sure to evaluate whether they use AI themselves and how resilient their business models are.
Equally important is finding education stocks that fit your goals and risk tolerance. Higher education companies and career training schools typically experience steady, though slower, growth with lower volatility. Educational technology (edtech) companies tend to have greater growth potential but much greater risk, as Duolingo investors can attest.
