This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
When you don’t even realize your money decisions are keeping you from unlocking greater wealth, you in effect have the “oh sh*t” moment that Yahoo Finance’s Akiko Fujita and yours truly had at the Milken Institute conference this week after chatting with Nuveen chief investment officer Saira Malik.
Mailik calls the investment shots for the money-managing giant, which boasts $1.2 trillion in assets under management. Suffice to say, she wasn’t on board with my 5% CD or Akiko’s high-yield savings account.
In effect, we are part of the crowd making one of the biggest investing mistakes Mailik continues to see as she travels the world to communicate with investors.
“Cash on the sidelines [is one of the biggest mistakes], Malik said. “Studies have shown that when you market time, you lose money relative to if you just stayed invested. This started last year as everyone expected a recession to come. They are holding their cash and 5% returns.”
“Nothing wrong with 5% returns, but when the market is up, multiples of that and even fixed-income markets have yields that are higher than that today, [so] you’re losing relative money. So I really recommend staying invested.”
Malik does make a valid point.
The S&P 500 returned 23% in 2023, including dividends, according to Bernstein data. Municipal bonds generated more than a 5% return. A 60/40 portfolio of stocks and bonds delivered over 17%.
Money market funds only yielded 3%, per Bernstein.
This year alone, the S&P 500 is up roughly 10% — getting the pep back in its step following a jobs report letdown.
Grocery prices are up nearly 30% since 2019, and here I am crowing about a 5% seven-month CD.
“5% was good in 2014,” Malik ribbed me.
Silly Sozzi.
So with some $6 trillion currently parked in money market funds (aka “cash on the sidelines”), it’s reasonable to think some of that gets put to work in 2024 amid more clarity on interest rates and the economy.
Malik unsurprisingly suggests investing in stocks.
She likes defensive stocks that peddle infrastructure. Apple and Amazon could also be viewed as defensive plays, given their strong fundamentals, Malik says.
One other investing mistake to avoid while I have you: going all in on the Mag Seven such as Tesla (TSLA) and Microsoft (MSFT). Top names in finance, like Apollo’s (APO) Marc Rowan (Disclosure: Yahoo Finance is owned by Apollo Global Management) and Avenue Capital Management’s Marc Lasry, struck a cautious note on the Mag Seven trade in interviews with us at Milken.
Now off to Bank of America I go!
Curious on how to put cash to work in tech stocks beyond the Mag Seven? Former longtime 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 Yahoo Finance’s Executive Editor. He is also the host of the “Opening Bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to come on Yahoo Finance Live? Email Brian Sozzi.
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