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Here’s a Big Investment Mistake You’re Probably Still Making
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When you don’t even realize that your financial decisions are holding you back from unlocking greater wealth, you actually have the “oh shit” moment that Yahoo Finance Akiko Fujita and what yours truly had at the Milken Institute conference this week after speaking with Nuveen Chief Investment Officer Saira Malik.
Mailik calls the shots for the money management giant, which boasts $1.2 billion in assets under management. Suffice it to say, she didn’t agree with my 5% CD or Akiko’s high-yield savings account.
In fact, we’re part of the crowd that makes one of the biggest investing mistakes Mailik continues to see as he travels the world to communicate with investors.
“Money on the sidelines [is one of the biggest mistakes], Malik said. “Studies show that when you trade time, you lose money compared to if you just stayed invested. This started last year when everyone was expecting a recession to come. They are saving their money and 5% returns.”
“There is nothing wrong with 5% returns, but when the market is rising, multiples of that and even fixed income markets have higher yields than they do today, [so] you are losing relative money. So I really recommend continuing to invest.”
Malik makes a valid point.
The S&P 500 returned 23% in 2023, including dividends, according to data from Bernstein. Municipal bonds generated a return of more than 5%. A 60/40 portfolio of stocks and bonds returned more than 17%.
Money market funds returned just 3%, according to Bernstein.
Nuveen Chief Investment Officer Saira Malik says put that money to work! Malik (right) speaks with Yahoo Finance Executive Editor Brian Sozzi and anchor Akiko Fujita at the Milken Institute Conference. (Yahoo Finance) (Yahoo Finance)
This year alone, the S&P 500 is up about 10% – regaining momentum after a disappointing jobs report.
Food prices have risen almost 30% since 2019, and here I am celebrating a seven-month 5% CD.
“5% was good in 2014,” Malik scoffed at me.
Bobo Sozzi.
So, with around $6 trillion currently parked in money market funds (also known as “money on margin”), it is reasonable to think that some of this will be deployed in 2024, in a context of greater clarity on interest rates and economy.
Unsurprisingly, Malik suggests investing in stocks.
She likes defensive stocks that sell infrastructure. Apple and Amazon can also be seen as defensive plays given their solid fundamentals, says Malik.
Another investment mistake to avoid while I’ve got you: going all in on the Mag Seven, like the Tesla (TSLA) and Microsoft (MSFT). Top names in the financial sector, such as Apollo’s (APO) Marc Rowan (Disclosure: Yahoo Finance is owned by Apollo Global Management) and Marc Lasry of Avenue Capital Management, gave a cautious note about the Mag Seven trade in interviews with us at Milken.
The story continues
Now I’m going to Bank of America!
Curious about how to put money to work in tech stocks beyond Mag Seven? Former long-time Cisco (CSCO) CEO turned venture capitalist John Chambers walks us through his investing process in a new edition of Opening bid podcast. Listen below.
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Brian Sozzi is the executive editor of Yahoo Finance. He is also the host of “Opening bid“podcast. Follow Sozzi on Twitter/X @BrianSozzi and so on LinkedIn. Tips on business, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.
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