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    As more consumers go cashless, here’s why you may still want to have some money handy

    Fewer Americans are paying for routine weekly purchases like food or gas in cash, according to a new survey from the Pew Research Center.
    But paying in cash is not dead, particularly for some demographics.
    Here’s how much money you may want to have in your wallet in a pinch.

    JGI/Jamie Grill

    Cold, hard cash could be going by the wayside for many Americans when it comes to routine transactions like paying for groceries or gas. Even so, it’s still important to keep some cash in your wallet, experts say.
    The cashless economy trend is not necessarily new, but it is gaining momentum, according to new research from the Pew Research Center.

    The nonpartisan fact think tank found 41% of Americans say none of their purchases in a typical week are paid for in cash. That’s up from 29% in 2018 and 24% in 2015.
    In contrast, 59% of respondents say they still pay for at least some of their typical weekly purchases in cash.
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    Meanwhile, those who say they use cash for all or almost all of their weekly transactions in a typical week is now 14%, down from 18% in 2018 and 24% in 2015.
    The results are based on a broader survey of 6,034 adults conducted in July that looked at people’s experiences with money, shopping and investing.

    The poll did not delve into what other forms of payments people prefer in place of paper currency. However, in a separate report Pew Research Center has found payment apps like PayPal, Venmo, Zelle and CashApp have been gaining traction particularly with adults under 50.

    Who’s most likely to pay in cash

    Certain demographics tend to turn to cash more than others.
    Adults 50 and up are more likely to say they always have cash on hand, with 71%, versus 45% of adults under 50.
    More than half of adults younger than 50 — 54% — don’t worry about having cash on them, in contrast to 28% of consumers 50 and older.
    Black and Hispanic adults were also more likely to say all or almost all of their weekly purchases are paid for in cash, with 26% and 21%, respectively. Just 12% of white respondents said the same.

    “Even though we see a shift that more and more people are forgoing cash, there are people who are still reliant on that,” said Monica Anderson, associate director of internet and technology research at Pew Research Center.
    People who tend to use cash also tend to have lower incomes. Those who use cash for all or most of their weekly purchases is 30% for those with household incomes below $30,000, versus 20% for those with incomes between $30,000 and $49,999 and 6% among households with incomes of $50,000 or more.
    The Covid-19 pandemic was thought to accelerate the transition to contactless payments as more people took precautions.
    “These are trends that we have seen shifting even before the pandemic,” Anderson noted.

    Most don’t need more than $50 in their wallet

    Still, there are times when only cash will do, such as when a businesses only accepts currency or you want to give someone a tip.
    “While it comes down to personal preference, I’d say that most people probably don’t need to carry more than $50 in cash,” said Ted Rossman, senior industry analyst at Bankrate.com.
    “In fact, many could probably get by with $20 or less,” he said.
    Cash is good for two things: privacy and anonymity, according to Rossman.

    Moreover, for the estimated 5.4% of households who are unbanked, cash transactions are crucial, he noted.
    Most people prefer credit or debt cards as their payment methods, according to Rossman. Credit cards in particular offer rewards, buyer protections and convenience. Because of that, Rossman said he is a “big fan” of that payment method.
    But those advantages only pay off if you’re able to pay the balance in full every month and avoid the high interest rates those cards charge, Rossman said.
    Credit card interest rates are becoming more expensive as the Federal Reserve hikes interest rates in an effort to curb record high inflation.

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    More car buyers pay at least $1,000 a month for their loans as high prices, rate hikes throw ‘a one-two punch’

    For electric and hybrid vehicles, the share of car buyers paying more than $1,000 monthly in loan payments is higher than for gas-powered cars.
    The average price paid for a new car in the third quarter was $45,971, according to an estimate from J.D. Power and LMC Automotive.
    While there are signs the market is cooling, that sticker price is 10.3% higher than the same period in 2021.

    Skynesher | E+ | Getty Images

    A growing share of car buyers are signing up for monthly loan payments of $1,000 or more amid rising interest rates and elevated auto prices, new research shows.
    Overall, 14.3% of consumers who financed a new vehicle in the third quarter committed to payments at or above that amount, up from 8.3% during the year-earlier period, according to Edmunds. For buyers of electric vehicles, that share is 26%; for hybrids, 24%.

    “High prices and rising interest rates are dealing consumers a one-two punch by catapulting monthly payments into a new realm,” said Jessica Caldwell, Edmunds’ executive director of insights.

    The interest rate on new car loans has reached 5.7%, up from 4.3% a year ago, Edmunds data shows. And with the Federal Reserve expected to continue raising interest rates to battle persisting inflation, auto loan rates could tick even higher.

    The average price for a new car nears $46,000

    The average price paid for a new car in the third quarter was $45,971, according to an estimate from J.D. Power and LMC Automotive. While there are signs the market is cooling, that sticker price is 10.3% higher than the same period in 2021.
    What’s more, sales incentives from manufacturers, which typically bring down the total price, were minimal. In September, the average discount was about $936, down 47.8% from a year earlier, the J.D. Power/LMC estimate shows.
    “The lack of inventory, coupled with strong demand, continues to allow manufacturers to maintain a low level of discounting,” said Thomas King, president of the data and analytics division at J.D. Power.

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    Ongoing inventory shortages are also partly to blame for elevated prices, as are changing consumer preferences.
    “We’ve seen Americans embrace a bigger-is-better mindset by gravitating toward larger vehicles,” Caldwell said, adding these autos also come with costly creature comforts and advanced technologies.

    Trade-in values can help reduce loan amounts

    If you can, take advantage of the value of trading in your used vehicle.
    The increase in monthly payments would be larger if not for the higher trade-in values on buyers’ used cars, King said. The average trade-in value for September was an estimated $9,617, up 21.7% from a year ago.
    While used car prices are softening, they remain 33% — or $8,810 — higher than where they would be if typical depreciation had occurred over the past two years, according to CoPilot, a car-shopping app.
    For buyers, although there may be less negotiating room amid ongoing inventory challenges, another way to keep your payment down is to get the best interest rate possible by having a good credit score.

    While it’s hard to know which credit score will be used by a lender (they have options), having a general goal of avoiding dings on your credit report helps your score regardless of the company it uses, experts say.
    “Some of the easiest ways to boost your credit score include checking your credit report for errors and keeping your open accounts in good standing — the latter means that you need to pay all your credit bills on time and in full each month,” said Jill Gonzalez, an analyst and spokesperson for personal finance website WalletHub.
    “You can also improve your score by keeping unused accounts open, as this helps build a long credit history, which is essential for a good credit score,” she said.

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    FA 100: How to invest heading into a recession, according to top-ranked advisors

    Join this year’s FA 100 honorees Friday on CNBC’s Twitter Spaces, 11 am ET

    This could be a prolonged period of economic uncertainty and market volatility, but there is still plenty of upside potential for investors, according to top advisors on the 2022 CNBC Financial Advisor 100 list. 
    Here are a few of the strategies they are using to steer their clients through the downturn.

    Investors have recently witnessed some of the worst trading days since 2020.
    Stocks took a dive in September over fears the Federal Reserve’s aggressive rate hike cycle will cause the economy to stall, but with more hikes to come, along with slowing growth, geopolitical unrest and persistent inflationary pressure, this could be a prolonged period of uncertainty and market volatility.

    And yet, there are “opportunities,” even now, said Ronald Albahary, a chartered financial analyst and the chief investment officer of Wetherby Asset Management, which ranked No. 20 on the CNBC FA 100 list of top financial advisors for 2022.
    Perspective is key, according to Albahary. “There are some relatively easy things investors can do to take advantage of this environment,” he said, “if you can look through the fog of negative sentiment.”
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    “The Fed has made it perfectly clear that their No. 1 objective is to squash inflation,” said Mark Mirsberger, a certified public accountant and the CEO of Dana Investment Advisors, No. 2 on this year’s CNBC FA 100 list — even if it means “they take us into a recession,” he added.
    “Right or wrong, that is where we are going.”

    Rick Keller, a certified financial planner and the chairman of First Foundation Advisors, ranked No. 33 on the CNBC FA 100 list, also said he sees “the upside” to the current climate. “It’s usually darkest before dawn,” he noted.
    Keller relies on the “barbell approach” to hedge against uncertainty in the face of rising rates and the possibility the market could pullback another 10% or more.
    The barbell approach is an investing strategy that looks to find a balance between risk and reward by investing in high-risk and low-risk assets while avoiding more middle-risk options. Keller’s clients have half of their fixed-income allocation in long-term bonds and the rest in shorter-term maturities.
    “If we do see the market come down another 10 to 20% range, it will be an extraordinary buying opportunity,” Keller said.
    Here are three strategies the top-ranked advisors are are using to steer their clients through the downturn:

    1. Build a diversified portfolio

    “If you were 60% or 70% in equities, reduce that to 40% or 50%,” advised Mirsberger. “The bonds side can carry a greater weight because there is less volatility and more opportunity.”
    As for stocks, stick with the best companies across a range of sectors. Look for “strong brands,” he said, “like Microsoft, Google, Amazon and Facebook — we are still seeing value in these perennial growers.”
    “The market selloff has been indiscriminate; quality companies will recover faster than others,” Mirsberger added.

    The market selloff has been indiscriminate; quality companies will recover faster than others.

    Mark Mirsberger
    CEO of Dana Investment Advisors

    For his clients, Keller also recommends reducing exposure to emerging markets, staying with high-quality stocks and diversifying.  
    “I would want to remain very diversified here because, in the end, it’s difficult to pick one sector over another and the prices are low enough,” he said. “If you are thinking out three to five years, you’re going to make some really good money.”   

    2. Focus on fixed income

    Since the Fed has hiked rates, Treasury yields have soared. “The good news is now you can get income from your very conservative portfolio or Treasurys,” Albahary noted.
    That makes short-term, relatively risk-free Treasury bonds and funds suddenly more attractive.
    “Savers have been punished for 20 years,” Mirsberger said. “This is really the first opportunity what many would say is an acceptable level of return without much risk.”

    Albahary agreed that investors should shift some allocations to fixed income.
    “Fixed income, which has been more ‘fixed’ than ‘income’ for far too many years is becoming more attractive,” Albahary said. “You are now getting paid 4% or more for a risk-free asset, that’s somewhat of a fat pitch,” he added, referring to an easy win.
    Both advisors suggest laddering your Treasurys to ensure you earn the best rates, a strategy that entails holding bonds to the end of their term.

    3. Harvest losses

    To take advantage of the recent selloff, bank those losses and use them to offset future profits.
    “This is the time to harvest those losses,” Keller said. “I think of it like money in the bank.”
    Tax-loss harvesting lets you offset investment gains and, if losses exceed gains, up to $3,000 of ordinary income. Anything left over can carry forward to future tax years.
    “That puts a dollar in your pocket, versus 75 cents,” Albahary added.
    Just be careful to avoid the “wash sale rule:” If you reinvest in a substantially identical investment during a 30-day window before or after the sale, then you can no longer book the loss for tax purposes.
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    Key Democrat outlines 5 priorities for $80 billion in IRS funding

    Senate Finance Committee Chairman Ron Wyden, D-Ore., has outlined five priorities for nearly $80 billion in new IRS funding.
    Goals for the 10-year investment include customer service, technology, audits on the wealthy, offshore tax evasion and criminal investigations.

    Senate Finance Committee Chairman Ron Wyden, D-Ore., questions IRS Commissioner Charles Rettig at a Senate Finance Committee hearing.
    Tom Williams | Pool | Reuters

    Senate Finance Committee Chairman Ron Wyden, D-Ore., has outlined five priorities for the nearly $80 billion in IRS funding enacted in August through the Inflation Reduction Act. 
    Wyden shared expectations for the 10-year investment — including customer service, technology, audits for the wealthy, offshore tax evasion and criminal investigations — in a letter to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig.

    These priorities are on top of implementing other tax provisions, such as clean energy credits, health insurance subsidies and others, he wrote.
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    “As you have explained, the funds will not be used to increase the audit rate relative to historical levels for those making less than $400,000,” Wyden emphasized. 
    Here’s a breakdown of the five priorities:

    1. Boost customer service 

    Wyden urged the IRS to improve customer service by clearing the backlog of unprocessed tax returns prior to next year’s filing season, pushing for infrastructure investments to “ensure these backlogs do not return,” Wyden wrote.

    As of Sept. 23, the IRS had 6.2 million unprocessed individual returns received this year, including tax year 2021 returns and late filings from previous years, according to the agency.  

    2. Invest in technology

    Wyden also asked for technology upgrades, to “improve service and enforcement,” making it easier to process third-party tax forms and flag errors to begin audits more quickly.
    “System upgrades should help the IRS use this data to catch tax cheats and reduce the likelihood that it will question accurate returns,” he wrote.

    3. Increase audits of the wealthy

    Wyden also highlighted the need to “rebalance audit rates,” between wealthy and lower-income taxpayers, by hiring more revenue agents.  
    IRS audits dropped by 44% between fiscal years 2015 and 2019, according to a 2021 report from the Treasury Inspector General for Tax Administration. Audits dropped by 75% for filers making $1 million or more, and 33% for low-to-moderate earners claiming the earned income tax credit, known as EITC.

    In 2021, the U.S. Department of the Treasury estimated there’s a $600 billion annual “tax gap” between what’s owed and collected, which may amount to roughly $7 trillion in lost tax revenue over the next decade.

    4. Pursue offshore tax evasion 

    Another priority is to crack down on “hundreds and thousands of shell companies in offshore tax havens” that increase the risk of underreported income, according to the letter.
    Wyden encouraged the IRS to develop a “more robust” whistleblower program, to partner with individuals to “unpack sophisticated schemes.” He said this program has delivered a “huge return on investment.”  

    5. Rebuild criminal investigations

    Wyden also pushed to hire more special agents for the IRS’ criminal investigations division, citing a loss of about one-quarter of its workforce since 2010.
    The letter comes as the IRS funding continues to be a hot-button issue among critics, with some saying the resources may target everyday Americans.
    However, Yellen responded to these claims in a letter to Rettig on Aug. 10.
    “Specifically, I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” she wrote.

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    46% of Americans continue to make this expensive credit card mistake

    One of the biggest credit card misconceptions is that carrying a balance from month to month will give your credit score a boost.
    In fact, any amount of revolving debt could ding your score and cost you.

    One of the biggest credit card misconceptions is that carrying a balance month to month will give your credit score a boost.
    To that point, 46% of Americans incorrectly believe that leaving a small balance on their card is better for their credit score than paying off the balance each month, a recent NerdWallet study found.  

    That’s an expensive mistake. In fact, any amount of revolving debt costs you in interest charges. Those typically are not calculated based on how much debt you roll over to the next statement period, but rather on your daily average balance. Carrying a balance could also ding your credit score.
    “Financially, you are benefited by trying to pay off as much as you can,” said Paul Siegfried, a senior vice president and credit card business leader at TransUnion.
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    Credit experts generally advise borrowers to keep revolving debt below 30% of their available credit to limit the effect that high balances can have on your credit score.
    Still, nearly half of credit card holders carry credit card debt from month to month, according to a Bankrate report, just as the interest charges on those balances are getting more expensive. 

    Credit card rates are now over 18% and will likely hit 20% by the beginning of next year as the Federal Reserve continues to raise interest rates to combat inflation.
    With the rate hikes so far, those credit card users will wind up paying around $20.9 billion more in 2022 than they would have otherwise, according to a separate analysis by WalletHub.
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    ‘Universities are going to continue to suffer.’ Some colleges struggle with enrollment declines, underfunding

    Enrollment declines and underfunding have hit the higher education system hard.
    Post-pandemic, a number of colleges are in financial jeopardy.
    Deep cuts in state funding for higher education have pushed more of the costs on to students and paved the way for significant tuition increases.

    More colleges are struggling financially

    Lincoln College in Lincoln, Illinois, closed at the end of the spring semester.
    “Lincoln College has been serving students from across the globe for more than 157 years,” President David Gerlach said. “The loss of history, careers and a community of students and alumni is immense.”

    The San Francisco Art Institute closed after 150 years. Marymount California University in Rancho Palos Verdes and Becker College in Worcester, Massachusetts, also recently shut their doors. As have other institutions across the country.

    New Jersey City University
    Photo Courtesy: Stepanstas | Wikipedia CC

    The number of colleges closing down in the past 10 years has quadrupled compared with the previous decade, according to a report in The Wall Street Journal.
    Heading into the 2022-2023 academic year, New Jersey City University declared a financial emergency.
    “A national trend of declining enrollment for college-aged students has resulted in a long-term erosion in the university’s ability to operate,” said Joseph Scott, chair of the Jersey City, New Jersey, school’s board of trustees, in a statement.

    Funding cuts have created a ‘crunch’ for smaller schools

    At the same time, deep cuts in state funding for higher education have pushed more of the costs on to students and paved the way for significant tuition increases.
    Meanwhile, college costs are still rising. Tuition and fees plus room and board for a four-year private college averaged $55,800 in the 2021-2022 school year; at four-year, in-state public colleges, it was $27,330, according to the College Board.

    Arrows pointing outwards

    “The real issue is that federal support for students and state support for students has been declining,” said Barbara Mistick, president of the National Association of Independent Colleges and Universities. “It’s inevitable there will be a crunch somewhere along the line.”
    Not all schools are struggling, however. In fact, the country’s most elite institutions are faring better than ever.
    Smaller, less selective schools — and those serving low- and middle-income students — have been the hardest hit.

    Nobody is doing anything to improve affordability, and universities are going to continue to suffer.

    Hafeez Lakhani
    founder and president of Lakhani Coaching

    “If those schools are closed, you are going to have a real gap in access,” Mistick said.
    College is becoming a path for only those with the means to pay for it, other reports also show. “The real challenge is that high school students are looking for an affordable school,” she said.

    Consider a college’s finances before you enroll

    If college is on the horizon, applicants would be wise to look into a school’s financial standing, Mistick advised. “Do research, know the community you are joining,” she said. “Talk to students on campus, talk to faculty before you enroll.”
    There may be other consequences of a college’s financial distress that could affect your education or degree.
    To stay afloat, some colleges have cut faculty and slashed areas of academic study, including programs in sociology, creative writing, music and religion.
    “Entire philosophy departments, history departments are closing down,” Lakhani said.
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    Biden’s student loan forgiveness plan could cost $379 billion over 30 years, Education Department estimates

    President Biden’s one-time student loan forgiveness could cost $30 billion per year over the next decade, according to the U.S. Department of Education.
    The plan calls for forgiving up to $10,000 per federal student loan borrower, or up to $20,000 for those who have Pell Grants.
    Despite some opposition to the plan, Biden remains committed to providing relief, the White House said this week.

    Demonstrator Gan Golan of Los Angeles at Occupy DC activities in Washington, D.C.
    Jacquelyn Martin

    President Joe Biden’s order to cancel student loan debt for millions of Americans could cost an average of $30 billion per year over the next decade, according to Biden administration estimates.
    The 10-year cost will be roughly $305 billion, as measured by reduced cash flows into the government, according to the Education Department. Over 30 years, that would be about $379 billion in today’s dollars.

    The Congressional Budget Office has estimated the plan will cost about $400 billion over 30 years. In addition, the cost of outstanding loans is set to increase by about $20 billion this year.
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    Biden announced the sweeping plan to cancel federal student debt in August. That includes $10,000 per borrower, or up to $20,000 for those who have Pell Grant loans, which are typically loaned to undergraduate students who demonstrate financial need.
    Individuals with less than $125,000 in income or married couples with joint income of $250,000 are eligible for the debt relief.
    The plan also will let borrowers cap the repayment of undergraduate loans to 5% of their monthly incomes, among other changes aimed at providing relief to the estimated 40 million people who would benefit from it.

    The student debt relief plan comes as payments on federal student loans, which have been paused during the pandemic, are set to resume in January.
    “Nearly 90 percent of relief dollars will go to those earning less than $75,000 per year,” the Education Department said. “And, no borrower or household in the top 5% of earners will benefit from this action.”
    However, research from the Committee for a Responsible Federal Budget released this week argued that 57% to 65% of the student loan debt cancellation and repayment pause will benefit those in the top half of the income spectrum.
    “In the end, the Administration’s student debt cancellation proposal is costly, inflationary, will drive up higher education costs and will deliver the majority of the benefits to those in the top half of the income spectrum,” the nonpartisan organization writes.

    The plan has drawn criticism from Republicans, and is subject to several legal challenges.
    However, White House press secretary Karine Jean-Pierre this week said “it’s a shame” Republicans are trying to block the relief and reaffirmed Biden’s commitment to carrying the plan through.
    “The President is going to continue to work for the American people, trying to find ways to give them a little bit of a break,” Jean-Pierre said during a press briefing on Tuesday.

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    With S&P 500 down 20% this year, retirement investors flee to safety and reconsider stock, bond strategy

    Despite stock market gains in the last couple of days, some investors are clearly tired of seeing losses in their retirement accounts this year. New data from Alight Solutions shows last month the vast majority of daily trades in 401(k) plans went from equities to fixed income.
    “Almost every time Wall Street has a major dip, we see people taking their money out of stocks and moving it into bonds,” said Rob Austin, head of research for Alight Solutions, which measures the daily trading activity of more than 2 million 401(k) investors, with about $200 billion in assets.

    Austin noted the movement was more pronounced in September than in August and July. “It was not surprising that it coincided at the time that the market fell,” he said.

    Investors are seeking safety

    Investors sought safety mostly in stable value funds, with 80% of traded assets put there in September, according to the Alight Solutions 401(k) Index. Money market funds garnered 15% of inflows, while bond funds got about 2% of assets.
    Meanwhile, 50% of money that was traded came out target date funds, which are designed to invest more conservatively as you get older. And more than a third of outflows came out of large-cap U.S. equity and mid-cap U.S. equity funds.

    Many stick with a 60/40 stocks, bonds split

    The traditional portfolio of 60% stocks and 40% bonds has lost about 20% of its value year to date, but most investment advisors recommend sticking with a balanced strategy. With bond yields improving, that mix looks better than it has in years, some say.
    Financial advisors also caution against switching strategies when the markets are in turmoil. Trying to time the market can mean investors lock in losses and miss out on the upside.

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    “If you wake up in the morning and decide to cash out and capture losses, it’s either too late or a bad decision,” said certified financial planner Jon Ulin with Ulin & Co. Wealth Management in Boca Raton, Florida. “Cash does not provide much in the way of a dividend and will not help to make up for 8% losses to inflation over time in as much as a diversified portfolio.” 
    The 60/40 split can be a good starting point for moderate-risk investors who don’t need to pull the money for 10 years or more.  Some advisors say what we saw this year with stocks and bonds both declining at the same time could be an anomaly.
    “Provided that inflation is under control, we expect that bonds will revert to their historical role of both a safe asset and one that provides relatively safe income,” said Arthur J.W. Ebersole of Ebersole Financial in Wellesley Hills, Massachusetts.

    Cash is an option for the risk averse

    For investors who really can’t stomach the risk, cash may not be a bad placeholder for now. But the risk adverse should know it is difficult to generate the returns they will need to retire with a 3% return.  
    “It’s really easy for my teammates [and I], or our industry, to say, ‘Well, don’t worry, just take the long-term approach and everything over the long-term will be fine,'” said Jason Ray, CEO of Zenith Wealth Partners in Philadelphia.
    Ray suggests investors break down their portfolios to see the returns in different asset classes. He recommends adding dividend-paying stocks as a value play and suggests younger investors with a longer time horizon add alternative investments, including investing in early stage startup companies and real estate.  
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