The Definitive Reason Why You Should Start Investing Less In Stocks Currently And More In Tech Start-Ups

Mohamed El-Erian, Chief Economic Adviser at Allianz, was on CNBC Thursday to discuss why investors should start investing less in equity markets and look for oppurtunities in start-up space. Here is what he said.

Barebell It!

"The point I was making has become more barbelled, okay?," El-Erian began. "Don't chase prices where central banks are highly manipulating markets and that is in the public markets. So, take some of the money that you have in the public markets and barbell it. Some in cash to give you optionality on likely corrections down the road and some into higher risk, but less liquid opportunities because central banks cannot reach those as easily."

He went on, "So, my message was barbell more, exit public markets that have become very crowded and very manipulated by central banks and wait for the optionality, the resilience you get here. But also don't give up on some really exciting opportunities that are happening in the start up world, in the private equity world. I mean, there's a lot going on especially in tech."

Invest Less, Liquidity Alone Can't Keep Prices High

So, I didn't said don't invest, I said invest less, okay? Public markets are still there in your portfolio, but invest less rather than don't invest. That's an important distinction. The reason why you want optionality is because we are coming from a period in which liquidity has been the major driver of asset prices.

"What the market is telling you today is, 'you know what? That is no longer sufficient to maintain prices at a high level. You need something more'. And that something more is fundamentals and that's why differentiation has become so important," El-Erian concluded.