Investing

Over half of Tiger 21’s members don’t invest in Nvidia, according to a recent asset allocation report released by the network of ultra high net worth investors and entrepreneurs.
Of the 43% members who have invested in Nvidia, most do not intend to add more stock, amid worries that its has already run up too high.
Nvidia shares slumped 9.5% overnight, wiping about $280 billion of its market cap, amid a broad sell-off in U.S. markets.

Sopa Images | Lightrocket | Getty Images

More than half of Tiger 21’s members don’t invest in Nvidia, according to a recent asset allocation report released by this network of ultra-high-net-worth investors and entrepreneurs.
The network’s second-quarter asset allocation report revealed that 57% of its members are not invested in chip darling Nvidia, with a bulk of the members who have chosen to stay away from the stock saying they do not intend to start a position in the company.

“While Nvidia is the undisputed leader in AI at the moment, no company’s growth lasts forever, and competitors often catch up, leading to a recalibration of the market,” said Michael Sonnenfeldt, chairman of the ultra-rich club. Its members’ personal assets are collectively worth over $165 billion, according to data provided by Sonnenfeldt.
Members of the group, which was set up in 1999 by Sonnenfeldt, share advice with each other on wealth preservation, investments and philanthropic endeavors.

Tiger 21 has 123 groups in 53 markets. The network has over 1,450 members.
Of the 43% members who have invested in Nvidia, most do not intend to add more stock, amid worries that it has already run up too high.
Those fears appear to have been well-founded with Nvidia’s stock tanking 9.5% overnight, wiping about $280 billion of its market cap, amid a broad sell-off in U.S. markets.

A sizable 43% of the club’s members surveyed also expect Nvidia’s success to not last the next decade.
Some members have chosen to avoid technology altogether, and hence there’s no Nvidia in their portfolio, preferring real estate or other sectors, said Sonnenfeldt.
“For others, it is due to the nature of tech investing today. Tiger 21 members watched Tesla rise only to now have almost all major auto manufacturers offer an EV, so while Nvidia is the leader today, some Tiger 21 members believe it is only a matter of time before the competition catches up,” he said.
Sonnenfeldt also said that the club’s members are more focused on preserving wealth rather than chasing high returns.
“They could be avoiding Nvidia due to its volatility and the risks associated with tech investments, despite its impressive growth,” he said.
Nvidia, which has been dubbed as ‘the world’s most important stock,’ rode the artificial intelligence boom to a $3 trillion market cap earlier this year, surging almost nine-fold since the end of 2022. 
The company’s meteoric growth, however, stalled a bit this summer. On Aug. 7, the stock tumbled about 27% to trade below its all-time high hit in June.
Nvidia led semiconductor stocks lower amid a sell-off on Wall Street on Tuesday, with shares continuing their slide in extended trading, down 2%.
Sonnenfeldt is optimistic about the wider AI industry though. “The potential of AI seems to be one of — if not the — most investible themes in all of financial history,” said Sonnenfeldt.
According to Tiger 21’s recent member allocation report, the bulk of its members’ allocation is in private equity, at 28%. Real estate takes up 26% of members’ portfolios in spite of high interest rates, while public equities make up 22% of their asset allocation. More

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., August 30, 2024. 
Brendan McDermid | Reuters

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Here’s what CNBC TV’s producers were watching as the three major averages started September on a losing note, and what’s on the radar for the next session.

Nvidia

On Tuesday, Nvidia lost more market value than any other stock in a single day: $279 billion. That’s a big number. CNBC’s man at the NYSE Bob Pisani notes this is the fifth time the stock has lost more than $200 billion in market cap in a single day, but Tuesday’s action takes the cake.
The stock lost 9.5%.
It is now down 23.3% since June 20. It is up, however, 118% in 2024.
The stock is down another 2% after hours. The action comes after Bloomberg reported that the Department of Justice is taking a closer look at antitrust concerns for Nvidia.

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Nvidia’s performance in the past five days

VanEck Semiconductor ETF

Dividend stocks

This part of the market held up OK on Tuesday. The SPDR S&P Dividend ETF (SDY) fell 0.4% on Tuesday, and hit a 52-week high early in the session.
Some might call the dividend yield on this ETF low. It’s 2.4% as of Tuesday night.

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SPDR S&P Dividend ETF (SDY) one-day performance

Utilities

The S&P Utilities Sector finished flat on Tuesday, but it hit a new 52-week high earlier in the day.
The sector is paying a 3% dividend, as of Tuesday’s close.
When interest rates go down, some investors look to utilities which generally pay a decent dividend.
If you look at the utilities sector going back to March 2022 — as rates started to rise — it is up 7% since then.
The Relative Strength Index of the sector is 71. Some traders might think this reading suggests the utilities sector is overbought, but it doesn’t necessarily mean that it’s guaranteed to fall.
In the last month, NRG Energy is the sector’s top performer. It’s up 14% in that period.
PG&E is up 8.3% in a month.
Constellation Energy is up 6.4% in a month.
At the bottom of the pile: American Water Works is off 2.6% in the past month, while AES is down 2.2%. Evergy is down nearly 0.8% in a month.

Mortgage applications

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Champion Homes in the past month

Big Oil

The S&P Energy sector was a bit of a downer Tuesday, losing 2.4%. It is now 9.4% from the April high.
APA was the biggest drag, down 6% on Tuesday. 
EOG Resources and Halliburton were down 4% in the session.
Exxon Mobil dropped 2.1% during the day. Chevron fell 2.2% and ConocoPhillips fell 3.46%.
CNBC’s Pippa Stevens will pick up coverage on Wednesday.
Brent and WTI are both down 4% in a month.
The S&P Energy sector is flat in that same time period.
Oneok and Targa are up 15% in a month. Williams Companies is up 8% in that time.
APA, Halliburton and SLB are the laggards: All three are down about 6% in a month.

Ahead of the NFL

CNBC’s Contessa Brewer will look at the gambling stocks on Wednesday as we close in on the first game of the football season.
The Kansas City Chiefs play the Baltimore Ravens on Thursday at 7 p.m. ET on NBC and Peacock.
DraftKings is down 22% since Feb. 12, the day after the Super Bowl. The stock is down 32% from the March high.
Flutter is 3% in the same time period. The stock is 9% from the March high.
MGM Resorts is down 22% since then. Caesars Entertainment is down 19% in that time period. MGM is 25% from the April high, and Caesars is down 35% from the September high.
By the way, on Thursday’s “Squawk Box,” CNBC will release a much-awaited list of how much NFL teams are worth. Don’t miss it. It’s going to be big.

Dollar Tree reports

The report comes out before the bell Wednesday morning.
Dollar General reported last week, and it wasn’t pretty.
Dollar General shares tanked after the company issued its results last Thursday. The stock was up 1% Tuesday, but it’s still down about 33% in a week.
Dollar Tree is 45% from the March high. Shares are down 14% in a week. More

Many younger retirees rely on Marketplace health insurance before age 65, which has lower monthly premiums thanks to boosted tax breaks through 2025.
But retirees can face a “phantom tax” without proper planning, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo.
Boosting income via earlier Social Security payments or Roth individual retirement account conversions could phase out Marketplace tax credits.

Hero Images | Getty Images

Since most Americans aren’t eligible for Medicare before age 65, many younger retirees rely on Marketplace health insurance, which offers lower monthly premiums through the end of 2025 thanks to boosted tax breaks. But retirees can face a costly tax surprise without proper planning, experts say.
As of open enrollment 2024, more than 5.1 million Americans aged 55 to 64 had Marketplace coverage, up from roughly 3.4 million in 2021, according to data from the Kaiser Family Foundation.

In 2021, Congress temporarily enhanced the premium tax credit, which allows Marketplace enrollees to lower monthly premiums upfront or claim the tax break when filing their return. The legislation covered 2021 and 2022, but lawmakers extended that benefit through 2025.  
With Marketplace benefits tied to earnings, younger retirees can leverage lower premiums after leaving the workforce. But some are subject to a “phantom tax” when income rises, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
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“These are very valuable credits,” and several financial moves in retirement could impact them, Lucas warned. “You have to be extremely careful.”

How the premium tax credit works

Before 2021, households with income between 100% and 400% of the federal poverty level were eligible for the premium tax credit. But the American Rescue Plan Act temporarily removed those limits and capped premiums at 8.5% of income amid the pandemic.

Calculating premium tax credit eligibility can be complicated. It’s based on the difference between a benchmark premium — the cost of the second-lowest-cost silver plan available in an area — and a maximum contribution based on a percentage of income. 

Plus, “changes in reporting circumstances should be reported immediately,” to make necessary adjustments, said CFP Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts.
Otherwise, you could overpay or underpay your Marketplace premiums, which are ultimately reconciled on your tax return, he added.   

Common premium tax credit issues 

Depending on income, the premium tax credit can save eligible younger retirees hundreds or even thousands per year. But higher income can phase out eligibility, experts say.  
“The big one,” in terms of affecting eligibility, is claiming Social Security at age 62 because your entire payment, including the nontaxable portion, counts toward the eligibility calculation for the premium tax credit, Lucas said.  
If you’re claiming the premium tax credit, long-term projections show it’s generally better to wait until at least age 65 to claim Social Security, he said.

The same issue can occur when boosting income via so-called Roth individual retirement account conversions, which transfer pretax or nondeductible IRA funds to a Roth IRA for future tax-free growth.
But with several years until required minimum distributions, you could still implement the strategy later, Lucas said.  
“The name of the game, ultimately, is paying minimum taxes, not just in one year or two years, but over your projected lifespan,” he added.  More

President Joe Biden may try to forgive student debt again as early as next month, in a sweeping redo effort that could impact tens of millions of Americans.
The relief package is almost certain to face legal challenges.

President Joe Biden announces a new plan for federal student loan relief at Madison Area Technical College Truax Campus, in Madison, Wisconsin, on April 8, 2024.
Kevin Lamarque | Reuters

President Joe Biden may try to forgive student debt again as early as next month, in a sweeping redo effort that could impact tens of millions of Americans.
The Biden administration’s attempt to deliver the aid could come roughly 14 months after the Supreme Court blocked it from carrying out its first student loan forgiveness plan. Just hours after the justices announced their ruling in June 2023, Biden vowed to find a new way to reduce or eliminate people’s education debt.

Despite the Republican-led legal challenges that have so far stymied the president from implementing wide-scale student loan relief, his administration has still managed to cancel more of the debt than any other before it.
Mainly through fixes to long-troubled loan relief initiatives, the Biden administration has now approved nearly $169 billion in loan forgiveness for roughly 4.8 million people.
Its new plan is expected to reach at least 25 million more people.

Relief could come as soon as next month

4 groups of borrowers expected to qualify

With the hope that this aid package survives the inevitable next round of legal challenges, the Education Department revised its forgiveness plan to be more targeted than its first.
In its email to borrowers, the department lists four categories of eligibility. Those are:

Borrowers who owe more than they did at the start of repayment.
Those who entered repayment on their undergraduate loans on or before July 1, 2005, or, if they have graduate loans, on or before July 1, 2000.
People who are already eligible for student loan forgiveness under one of the government’s existing programs but just haven’t yet applied.
Students from “low-financial value” programs.

Republicans may try again to stop relief plan

For critics of broad student loan forgiveness, Biden’s new plan looks a lot like his first.
After Biden touted his revised relief program, Missouri Attorney General Andrew Bailey, a Republican, wrote on X that the president “is trying to unabashedly eclipse the Constitution.”
“See you in court,” Bailey wrote.
Missouri was one of the six Republican-led states — along with Arkansas, Iowa, Kansas, Nebraska and South Carolina — to bring a lawsuit against Biden’s first sweeping debt relief effort.

The red states argued that the president overstepped his authority, and that debt cancellation would hurt the bottom lines of lenders. The six conservative Supreme Court justices agreed with them.
Once the Biden administration publishes its new student loan forgiveness plan in October, more legal challenges are inevitable, Kantrowitz said.
“Lawsuits seeking to block the final rule will follow soon after it is published,” he said.
A recent Supreme Court ruling could also make it harder for Biden’s revised plan to survive those broadsides.
The high court in late June overruled the so-called Chevron Doctrine, a 40-year-old precedent that required judges to defer to a federal agency’s interpretation of disputed laws. The 6-3 ruling, which split the conservative-majority court along ideological lines, is expected to undermine the federal government’s regulatory power. More

“Rush” hour isn’t what it used to be.
Commuters are going in later and leaving earlier, according to traffic data.
With more flexible work arrangements, going to the office for only part of the day, or “coffee badging” is now common.

Afternoon commuters sit in traffic on southbound Interstate 5 near downtown San Diego on March 12, 2024.
Kevin Carter | Getty Images

“Rush” hour isn’t what it used to be.
As more commuters settle into flexible working arrangements, fewer workers are making early morning or early evening trips compared to pre-pandemic traffic patterns

The traditional American 9-to-5 has shifted to 10-to-4, according to the 2023 Global Traffic Scorecard released in June by INRIX Inc., a traffic-data analysis firm.

Midday trips are the new normal

“There is less of a morning commute, less of an evening commute and much more afternoon activity,” said Bob Pishue, a transportation analyst and author of the report. “This is more of the new normal.”
Now, there is a “midday rush hour,” the INRIX report found, with almost as many trips to and from the office being made at noon as there are at 9 a.m. and 5 p.m.

Also, commuters have all but given up on public transportation. Ridership sank during the pandemic, Federal Reserve Bank of St. Louis data shows, and never fully recovered.
The result is a surge in traffic congestion throughout the peak midday and evening hours, according to Pishue.

“Pre-Covid, the morning rush hour would be a peak and then the evening peak would be much larger,” he said, describing two apexes with a valley in between. “Now, there is no valley.”

Flexibility allows for ‘coffee badging’

“Employees have become accustomed to the flexibility of working from home and may only come to the office when absolutely necessary,” said David Satterwhite, CEO of Chronus, a software firm focused on improving employee engagement.
“That means they may jump out early to catch a train home, come in late or pop in for one meeting and then leave,” Satterwhite added.
Also known as “coffee badging,” the habit of only going to work for a few hours a day has become widely accepted, or at least tolerated, other recent reports show.
More than half — 58% — of hybrid employees admitted to checking in at the office and then promptly checking out, according to a separate 2023 survey by Owl Labs, a company that makes videoconferencing devices.
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“We used to call it the jacket-on-the-back-of-the-chair syndrome,” said Lynda Gratton, professor of management practice at London Business School.
Whether a company has a strict return-to-office mandate or some variation of a hybrid schedule, “organizations need to be clear about what the deal is,” she said. “An individual employee can decide whether they want the deal or not.”
However, because most people say they don’t want to come into the office because of the commute, coffee badging is the least successful type of compromise, Gratton added. “That is the worst of all worlds, they are still doing the commute but not putting in the hours at the office.”

Employee burnout shows

In part, workers are wrestling with employee burnout, and their level of commitment has taken a hit.
After mostly trending up for years, workplace engagement has flatlined.
Now, only one-third of full- and part-time employees said they are engaged in their work and workplace, while roughly 50% are not engaged, which can also be seen in the rise of “quiet quitting.” The rest, another 16%, are actively disengaged, according to a 2023 Gallup poll released earlier this year.
Not engaged or actively disengaged employees account for approximately $1.9 trillion in lost productivity nationwide, Gallup found.

These days, employees are more likely to consider work/life balance, flexible hours and mental health support over career progression, other reports also show. And fewer want to spend any more time at the office than they already do.
If the ability to work from home was taken away, 66% of workers would immediately start looking for a job that offered more flexibility, Owl Labs found — and a bulk of those employees, roughly 39%, would promptly quit.
“What we need to get to is a clearer description of how is it you are at your most productive, and that requires a senior team who are seeing this as an opportunity to redesign work and not simply responding to what happened during the pandemic,” Gratton said.
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With the Federal Reserve poised to start lowering interest rates, experts are divided as to whether the U.S. economy is in for a recession.
Retirees and near-retirees perhaps face the biggest risks if an economic downturn upends their financial plans.
Experts say there are certain questions to ask now to better safeguard your financial plan from the unexpected.

Ascentxmedia | E+ | Getty Images

With the Federal Reserve poised to start cutting interest rates, experts are divided on what’s ahead for the U.S. economy.
While some worry the economy could be in for a broad decline, or recession, others hope the central bank can effectively avoid a downturn and execute a “soft landing.”

For people who are in or near retirement, the stakes are particularly high when it comes to what happens next.
A recession or sudden market decline could upend the size of their retirement nest egg, planned retirement date or both.
Everyone approaching retirement should be asking themselves, “What’s my Plan B?” said Anne Lester, author of “Your Best Financial Life” and former head of retirement solutions at JPMorgan.

“Now is a great time to build some scenarios and start asking yourself that question, ‘What would I do?'” Lester said. “If you have a plan, you’re much less likely to panic and do something unwise.”
Research shows people who are approaching retirement are much more likely to panic when a downturn sets in, according to David Blanchett, managing director and head of retirement research at PGIM DC Solutions.

“Being proactive now is especially viable for older Americans for whom retirement is all of a sudden becoming very real,” Blanchett said.
To test your current retirement plan, asking some questions can help.

Is my portfolio allocated where it should be?

For retirees and near-retirees, a market decline can prompt what’s known as sequence of returns risk — where poor investment returns negatively impact how long retirement savings may last.
“If you are near the end of your career or just starting retirement and a recession hits, then you have much less time than you’d like for your portfolio to recover,” said Emerson Sprick, associate director of the Bipartisan Policy Center’s economic policy program.
A market selloff can happen without the economy going into a recession, Lester said. And the economy can go into a recession without meaningful stock market declines.
Consequently, it helps to always be prepared for the markets — and your retirement nest egg — to take an unexpected big hit.  
The good news is that it’s rare for the markets to have a big correction — defined as a decline of 10% or more — and keep sinking, Lester said.
“It is very unlikely that we rerun 1929 again, where you have five or seven years of very bad returns in a row,” Lester said.
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Certain rules of thumb aim to help gauge how much you should have allocated to equities, such as subtracting your age from 120. (For example, if you’re 50 years old, you should have 70% of your portfolio in equities. If you’re 70, equities should comprise only 50% of investments.)
Yet it’s important to keep in mind that everyone’s financial situation — and ability to take risk — is different, based on their mix of assets, Blanchett said.
Now can be a great time to get ahead of certain risks.
“If you know, for example, if the portfolio goes down by 10% you’re going to move to cash, move to cash now before it’s going to do that,” Blanchett said.
Government bonds also provide opportunities to earn returns that weren’t available two or three years ago, he noted.
To avoid having to sell investments and lock in losses when the market declines, it helps to have a cash buffer you can turn to. For retirees and near retirees, having two to three years of spending in cash can be a solid approach, Lester said.

What are my sources of income?

Having income that’s guaranteed can help reduce the impact market fluctuations have on your portfolio.
For most retirees, Social Security provides steady monthly checks.
But if you claim at the earliest possible age — 62 — your retirement benefits will be permanently reduced. By waiting until full retirement age — typically 66 to 67, depending on date of birth — you will receive 100% of the benefits you’ve earned. And if you wait even longer — up to age 70 — you stand to increase your benefits by about 8% per year.
“Now more than ever, delaying claiming Social Security is just a spectacular thing to start with,” Blanchett said.
Individuals may also want to consider investing in an annuity, insurance products that also provide monthly income streams in exchange for an upfront lump sum payment paid to an insurance company.
“The higher interest rates are, the better the payment stream is off an annuity,” said Lester, who also serves as an education fellow for the Alliance for Lifetime Income, a nonprofit formed to educate consumers on annuities.
“Rates are likely to drop in the future, and lower interest rates are going to likely result in lower payouts for annuity,” Blanchett said. “So addressing this now vs. later will likely lead to more income, a higher return.”
Certain products like multi-year guaranteed annuities and other fixed annuities can provide guaranteed returns in a tax-advantaged way for older Americans, he said.
Before purchasing an annuity, consumers should do their due diligence as to whether a product fits their financial circumstances. Consulting a reputable licensed financial professional can help. More

The Walmart logo is seen at one of its stores in Miami on May 2, 2024.
Jakub Porzycki | Nurphoto | Getty Images

With the Federal Reserve expected to cut interest rates in September, dividend-paying stocks could be set to outperform.
That is because the dividend yields on these names will look more attractive compared to the returns offered by other income-generating assets, including bonds.

Given the vast universe of companies paying dividends, it could be difficult for investors to select the right stocks. Investors may want to consider top analysts’ recommendations as they select attractive dividend stocks with strong financials.
Here are three dividend stocks, highlighted by Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
EPR Properties
This week’s first dividend stock is EPR Properties (EPR), a real estate investment trust. It is focused on experiential properties such as movie theaters, amusement parks, eat-and-play centers and ski resorts. EPR offers a dividend yield of 7.3%.
RBC Capital analyst Michael Carroll recently upgraded his rating for EPR to buy from hold, and he raised the price target to $50 from $48. He thinks the company has successfully sailed through tough operating conditions, including the Covid-19 pandemic and the actors/writers strikes.
Carroll thinks EPR is in a better position to deliver favorable results, as the aforementioned headwinds are fading. “We expect the theatrical box office will reaccelerate in 2H24 and in 2025, driving higher percentage rents and strengthening the tenant base,” said the analyst.

Commenting on the concerns about EPR’s significant exposure to theaters, the analyst noted that management intends to bring down this exposure over time. He added that worries about AMC, one of the company’s key tenants, seem to be reducing to a certain extent, with AMC taking initiatives such as capital raises and debt refinancing.
Finally, Carroll highlighted that EPR’s high dividend yield is adequately protected by its nearly 70% adjusted funds from operations payout ratio and a solid balance sheet with a 5.2-times net debt to earnings before interest, taxes, depreciation and amortization ratio. 
Carroll ranks No. 703 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 63% of the time, delivering an average return of 7.7%. See EPR Properties Ownership Structure on TipRanks.
Energy Transfer
The next dividend pick is Energy Transfer (ET), a limited partnership. The midstream energy company made a quarterly cash distribution of 32 cents per unit on Aug. 19, reflecting year-over-year growth of 3.2%. Energy Transfer has a dividend yield of 8%.
Reacting to ET’s Q2 results, Stifel analyst Selman Akyol said the company reported better-than-anticipated EBITDA and called out several growth opportunities, mainly in the company’s Permian to Gulf Coast value chain.
The sentiment about natural gas is upbeat, as it is expected to supply a major portion of the energy requirement of artificial intelligence data centers. Akyol highlighted that ET’s management thinks the company’s solid footprint can provide the natural gas needed to supply continued power to data centers.
Akyol pointed out that ET is also gaining from a rise in demand from utilities, mainly in Texas and Florida. These two states offer ET attractive growth prospects, given their potential data centers and a solid rise in their population.
“Energy Transfer is never short opportunities, and, while run rate capex could creep up, we continue to favor its positioning,” said Akyol. He reaffirmed a buy rating on ET stock with a price target of $19.
Akyol ranks No. 137 among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 71% of the time, delivering an average return of 10.3%. See Energy Transfer Stock Charts on TipRanks.
Walmart
Big-box retailer Walmart (WMT) recently impressed investors with its upbeat results for the second quarter of fiscal 2025. The company also raised its full-year outlook to reflect strong performance in the first half of the year.
Walmart continues to reward shareholders with dividends and share repurchases. In the first half of fiscal 2025, the company paid more than $3 billion in dividends and repurchased shares worth $2.1 billion. Earlier this year, Walmart increased its dividend by 9% to 83 cents a share. This marked the 51st consecutive year of dividend hikes for the company.
Following the Q2 print, Baird analyst Peter Benedict reiterated a buy rating on Walmart and raised the price target to $82 from $70. He highlighted that the retailer gained market share despite a choppy macro backdrop, thanks to its persistent focus on value and convenience.
The analyst stated that Walmart’s second-quarter results clearly reflected the effect of its transformation efforts, “with ~70% of U.S. comp growth digitally driven and >50% of enterprise-wide [earnings before interest and taxes] growth coming from higher margin advertising/membership income streams.”
Benedict also highlighted the 10-basis-point sequential increase in Walmart’s trailing 12-month return on investment to 15.1%. This improvement was fueled by the company’s investments in areas such as automation and generative AI.
Benedict ranks No. 35 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, delivering an average return of 15.9%. See Walmart Stock Buybacks on TipRanks. More

Younger adults are showing a preference for the renting lifestyle, studies show, and not just because they are priced out of ownership.
From cars to clothes and homes, experts weigh in on when it makes sense to buy vs. rent.

Vm | E+ | Getty Images

Owning isn’t always what it’s cracked up to be.
For many reasons — including affordability — more Americans are choosing to rent everything from cars and apartments to clothing and furniture these days, according to a report by Intuit Credit Karma.

Far beyond the traditional tuxedo, the rental industry has expanded in recent years to include power tools, musical instruments, designer handbags, baby gear and even funeral caskets.
Now, 28% of adults routinely rent goods and services, Credit Karma found. However, when factoring in housing, that percentage jumps to 47%. 
The growing share of renters is largely due to higher prices, although some people simply prefer renting over buying, opting for a “rent-first” lifestyle, according to the survey, which polled more than 2,000 adults in June.
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Aside from affordability concerns, more than half — 58% — of those polled said they find value in renting, because it allows for more flexibility and is a way to avoid overconsumption, which has become an increasing concern among millennial and Gen Z adults. 

“Renting is a great option for many people,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. However, it always pays to do the math, she advised.
“Some people do great renting clothes and, for special events, this can be good,” said McClanahan, who also is a member of CNBC’s Advisor Council. “However, if you know you have a lot of special events, a few really good [owned] pieces can last a long time.”
Clothing prices have been hard hit by inflation. Since July 2020, men’s and women’s apparel prices are up 15% and 13.3%, respectively, according to the U.S. Bureau of Labor Statistics’ consumer price index.

Meanwhile, It may not make as much sense to lease a car, McClanahan said, “as that ends up being higher costs long-term.”
Although monthly lease payments tend to be lower than car loan payments, financing a car with a new or used auto loan usually ends up costing less than a lease in the long run, especially for consumers who hold onto vehicles for years.
Additionally, car lease agreements often come with routine service included in the terms, but the downside is there are also mileage limits and potential charges for wear and tear.
More importantly, car buyers will benefit from owning the vehicle outright at the end of a loan term, and have built equity in the asset.

To buy or rent a house in today’s market

Since housing costs are the biggest expense for most people, it may make sense to rent, at least initially.
“Unless you are absolutely sure you are dedicated to being in a home for at least five years, you should definitely rent,” McClanahan said. “Only when you are settled with life, jobs and family is when it probably makes sense to buy a home.”
Because millennials are more likely to postpone marriage and starting a family, they are able to cast a wider net when looking for place to live, or relocate for a job, if necessary, which makes renting more worthwhile.
“This generation is different,” said Dottie Herman, vice chair at Douglas Elliman. “They believe in homeownership but now there is a choice.”
According to Herman, “it’s not quite as important to them to own a house. A lot of them say, ‘I’ll rent, and I’ll think about it.'”

Of course, some Americans, especially young adults, are renting because they must.
Higher mortgage rates and a shortage of houses on the market relative to buyer demand have kept home prices elevated and created an affordability crunch for would-be buyers. Sometimes renting is the only option available.
Close to three-fourths of would-be homeowners said affordability is their greatest obstacle, according to a report by Bankrate. Among younger adults, 50% said homeownership is only achievable for the wealthy, Credit Karma also found. 
Even though wealth creation has been concentrated amongst homeowners in recent years, often there is a pressure to buy, when it may not make financial sense, according to Michael Krowe, director of financial planning at Edelman Financial Engines.
“Don’t make a home purchase simply because you think it’s going to surge in value,” he said. “You might think your home is an investment — it’s not. Your home is a place to live.”
“Buy a home because you like the neighborhood, schools and proximity to friends and family,” Krowe said. There may be benefits to renting in this market, he added, particularly if it allows you to avoid stretching beyond your means.
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