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Here’s one big investing mistake you’re probably still making

This is The Takeaway from today’s Morning Brief, that’s possible to register to receive in your inbox every morning, along with:

If you don’t even realize that your money decisions are holding you back from unlocking more wealth, you’re basically missing the “oh sh*t” moment that Yahoo Finance’s Akiko Fujita and yours truly had this week at the Milken Institute conference a conversation with Nuveen Chief Investment Officer Saira Malik.

Mailik is in charge of investments for the money management giant, which has $1.2 trillion in assets under management. Suffice it to say, she didn’t approve of my 5% CD or Akiko’s high-yield savings account.

In fact, we are part of the crowd making one of the biggest investment mistakes Mailik continues to encounter as she travels the world communicating with investors.

“Staying cash on the sidelines (is one of the biggest mistakes), said Malik. “Studies have shown that when you spend time in the market, you lose money compared to if you just stayed invested. This started last year when everyone expected a recession. They keep their money and 5% returns.”

“There’s nothing wrong with a 5% return, but if the market goes up, multiples of that and even fixed income markets have returns that are higher than today, (so) you’re losing money relatively. So I really recommend staying invested. “

Malik does indeed make a valid point.

According to data from Bernstein, the S&P 500 has returned 23% in 2023, including dividends. Municipal bonds generated a return of more than 5%. A 60/40 portfolio of shares and bonds returned more than 17%.

Money market funds yielded just 3%, according to Bernstein.

Nuveen CIO Sara Mailk says: Put that money to work!  Mailik (right) talks with Yahoo Finance editor-in-chief Brian Sozzi and host Akiko Fujita at the Milken Institute Conference.Nuveen CIO Sara Mailk says: Put that money to work!  Mailik (right) talks with Yahoo Finance editor-in-chief Brian Sozzi and host Akiko Fujita at the Milken Institute Conference.

Nuveen chief investment officer Saira Malik says put that money to work! Malik (right) talks with Yahoo Finance Editor-in-Chief Brian Sozzi and host Akiko Fujita at the Milken Institute Conference. (Yahoo Finance) (Yahoo Finance)

This year alone, the S&P 500 is up about 10%, boosting spirits after a setback in the jobs report.

Grocery prices are up almost 30% since 2019, and here I am crowing about a 5% CD for seven months.

“5% was good in 2014,” Malik told me.

Stupid Sozzi.

So with around $6 trillion currently parked in money market funds (aka ‘cash on the sidelines’), it’s reasonable to think some of that will be put to work in 2024 as more clarity emerges about interest rates and the economy.

It’s no surprise that Malik suggests investing in stocks.

She likes defensive stocks that lean on infrastructure. Apple and Amazon can also be seen as defensive choices given their strong fundamentals, says Malik.

Another investing mistake to avoid while I’ve got you: going all-in on the Mag Seven like Tesla (TSLA) and Microsoft (MSFT). Top names in the financial sector, such as Marc Rowan of Apollo (APO). (Disclosure: Yahoo Finance is owned by Apollo Global Management) and Marc Lasry of Avenue Capital Management made a cautious comment about the Mag Seven trade in interviews with us at Milken.

Now off to Bank of America, I’m going!

Wondering how to deploy cash in tech stocks outside of the Mag Seven? Former Cisco (CSCO) CEO turned VC investor John Chambers walks us through his investing process in a new edition of the Opening Bid podcast. Listen in below.

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Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email [email protected]. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.

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