New market mantra! Sell in May, 'trade away': CIO

Treasury supply may be shrinking: Pro

Investors can't sit on stock or bond index funds this year and expect to make money, Highland Capital co-founder Mark Okada said Friday in a CNBC interview.

"You got to work hard in these markets. The market has been all over the place," Okada said in a "Squawk Box" interview. "You have to be an active trader."

Forget the old adage "sell in May and go away," he continued, the new market mantra should be "sell in May and trade away."

Read MoreWill 'technical tsunami' ooze into Friday trading?

Wall Street is hoping to avoid the third-stright triple-digit loss for the Dow Jones Industrial Average—after stocks sank for a second day as the 10-year Treasury yield fell below the key 2.50 percent level.

At the start of the year, Okada—and most market-watchers—had predicted bond yields were going to go higher as the Federal Reserve continued tapering its asset purchases, which have been reduced in four, $10 billion moves to a pace of $45 billion a month.

Nikada | E+ | Getty Images

But bond yields keep falling, while investors keep buying Treasurys.

"The markets are bigger than the Fed in the short term," Okada said. "Demand for Treasurys is still high, but the supply may be shrinking as the government has to borrow less."

With bond yields dropping, the Dow had its worst day Thursday in five weeks—losing 1 percent to close at 16,446. The lost nearly 1 percent to finish at 1,870. The stock market is being hurt by a number of factors, including worries about economic growth in the United States and abroad.

Just Tuesday, the Dow and S&P closed at new highs. But now, for the year, the Dow is off nearly 1 percent, while the S&P is only up 1 percent in 2014.

Read MoreWhy long-short stock funds may make a comeback

Okada, whose firm has $19 billion in assets under management, said he'd be happy with a 6 percent return in 2014 as either a stock or bond investor. "We have no inflation, 6 percent is a good number."

Going forward, he said: "I'm not calling for a bear market per se, but I think we've got a [stock] consolidation here. Maybe this is what a risk-off looks like in the 'new normal.'"

—By CNBC's Matthew J. Belvedere