America's No. 1-ranked wealth manager breaks down the 3 mistakes every millennial investor should avoid - and what they should do instead

Bank of America Merrill Lynch

Wealth manager Jeff Erdmann of Bank of America Merrill Lynch's Erdmann Group

• Forbes has ranked Jeff Erdmann of Merrill Lynch's private banking and investment group as the nation's best wealth manager for three years in a row.
• In an exclusive interview with Business Insider, Erdmann said millennials and other new investors to avoid three common, basic mistakes.
• Erdmann's group manages $10.5 billion in assets for wealthy families. He also revealed to Business Insider the basic method he uses to get young investors into the market.
• Visit Business Insider's homepage for more stories.

The top-ranked wealth manager in the US says a few simple pointers can help millennials and other young investors avoid major mistakes as they decide what to do with their money.

Jeff Erdmann of Merrill Lynch's private banking and investment group has topped Forbes' list of the best wealth managers in America for three years in a row based on factors including his experience and the revenue he produces for clients.

Erdmann's team manages $10.5 billion for very wealthy families, most of which include company founders and current or ex-CEOs and presidents. He invests alongside those clients, and he's particularly focused on the very long term.

Here's some additional context around the types of big hitters that rely on Erdmann's expertise: He requires a minimum account size of $2.5 million, and the households he represents typically place roughly $35 million under his care.

So while very few millennials and members of Generation Z have ascended to that kind of status yet, Erdmann says those young investors can learn a lot from the techniques he employs for his ultra-rich clients. In fact, he says a perfect starting point is recognizing what kinds of behaviors to avoid.

In an exclusive interview with Business Insider, Ermann broke down the three mistakes millennial invesotrs should avoid at all costs. And as an added bonus, he laid out the approach he uses with younger clients.

Mistake 1: Taking big risks right away

Erdmann says some young investors believe they have to take big risks because they're starting out with relatively little money and want to be able to pay for a wedding or a house in the near future.

In his mind, those investors have the situation backward. He says their smaller initial investments put them in a vulnerable position when it comes to absorbing huge losses.

"(Being young) doesn't mean that you get more aggressive and trade in and out of the market and speculate on a particular commodity or an options strategy," he said. "You can't afford to lose your money."

What young investors should do instead:

Erdmann says new investors don't need to gamble because they have the advantage of time. He says they should invest in growth assets, but without making huge, questionable bets.

Mistake 2: Relying on robots

Erdmann praises some of the changes robo-advisors have brought to the investing world, like reducing fees and making it simpler for people to steadily invest their money. But he says that ultra-easy trading can encourage investors to do the wrong thing at the worst time.

"The biggest risk investors have is their emotions," he said. "You can pick your phone up, hit a button, and get in or out of the market. The biggest mistakes investors have made historically is those types of actions."

What young investors should do instead:

Erdmann advises millennials to separate their emotions from their investment decisions, remember to think long-term, and find an advisor who can help them meet their goals. He notes that some robo-advisors give customers an option to contact people for advice, but many don't take that opportunity.

Read more: The top investment chief at $1.9 trillion Wells Fargo revealed a bold strategy he's recommending to clients - and it goes against everything traders have known for the past 10 years

Mistake 3: Chasing old trends

It's natural that a new investor might want to dive in and pursue a popular strategy that's worked in the recent past.

"What a lot of new and young investors do is they often chase what was the hot trend in the last 3, 5, to 10 years," he said. "I've yet to see a 10-year trend be the great trend for the following 10 years."

Erdmann uses indexing as an example. It's been an extremely successful tactic during the bull market, and an investor who put his or her money in a fund tracking the S&P 500 a decade ago and left it alone would have enjoyed tremendous returns. But over the decade before that, the index declined substantially.

What young investors should do instead:

Erdmann says investors should understand that a high-profile trend won't continue indefinitely. He says they should instead adopt more than one investment strategy, so they aren't relying on one specific stock, region, or method to provide the returns they want.

Bonus: Erdmann's approach to handling young clients

Along with staying informed and trying to keep fees and taxes low, Erdmann says he recommends a three-part strategy to new investors once they've decided on a trading strategy.

1. Invest about a third of their money right away.
2. Gradually invest the next third over the following six to 18 months. This "cost averaging" technique is how many people put money into employer-sponsored 401(k) retirement plans.
3. Use the remaining third to take advantage of market declines, buying when assets are appealingly cheap.