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Common investing mistakes that beginners should avoid
Knowing the pitfalls is the first step to making smarter money decisions.
- Taking control of your money and making better financial decisions is something that everyone can and should do.
- There is a bit of a learning curve when it comes to investing. A big part of making money is learning how to avoid common mistakes.
- Buying cheap stocks instead of smart ones, being too reactive to news headlines, and thinking short term are a few of the things that new investors often get wrong.
You want to start making better choices and take control of your money, but how? For those new to the world of investing, taking that first step can feel daunting and confusing. Helpful acronyms, numbers, and terms to learn are written in a language you don't yet speak. With a little time, the right resources, and a willingness to learn, the dream of one day managing your money smarter can become a reality. For beginners and seasoned investors alike, a big part of making money is being able to identify and avoid making common mistakes.
A useful (and free) personal finance tool for investors at all levels is M1 Finance. It's a commission-free investing and money management app that was recently rated #1 for Sophisticated Investors and #1 for Socially Responsible Investing by Investopedia, beating out competitors like Personal Capital, Vanguard, and Betterment. Available for Android and iOS devices, M1 Finance lets users create a portfolio of stocks or exchange-traded funds (ETFs) for free. Investors can also borrow from a flexible portfolio line of credit with a low base rate, and M1 is currently beta testing FDIC-insured checking accounts with debit cards that investors can use instead of their existing checking account. To find out more about how it works and to sign up today, click here.
As you set out on your investing journey, here are a few common mistakes to avoid:
Don’t focus on the short term.
Treating the stock market like placing a bet is a strategy that probably won't work out for you. Successful investor Warren Buffett warns new investors against day trading. "If you aren't willing to own a stock for 10 years, don't even think about owning it for ten minutes," Buffett wrote in a letter to shareholders back in 1996. Buying and selling stocks quickly may get you a few dollars, but making a smart investment in a good company and sticking with it over a long period of time could make you exponentially more.
Don’t buy what you don’t understand.
Never buy a piece of a company when you don't understand how it makes money. Do your research and learn about the industry and the mechanisms that move it, otherwise the money you invest could disappear and you would have no idea why.
But don’t only buy what you know.
According to Investopedia, novice investors (and those with experience) should probably stick to the principle of diversification. In poker terms, you don't want to "let it ride" on one big stock in the hopes that your money will double or triple. Create a portfolio and spread the money around. As a general rule according to the experts, never allocate more than 5-10% to any one investment.
Don’t use your retirement money.
Risking your livelihood on investments is dangerous and ill-advised. If losing the money you are thinking of investing would ruin your life or the lives of those around you, then you absolutely should not do it.
Find good investments, not cheap ones.
In the same vein as the first tip, it's important for new investors to learn that just because they can afford to buy a stock, that doesn't mean they should. The idea of investing early in the next Google and riding the wave to wealth is enticing, but that's not a realistic strategy. Tried and true is often better than shiny and new.
And lastly, don’t overreact based on the news.
Hearing about a tanking stock on the news can be scary if that company is a part of your portfolio, but experts warn against letting your emotions get the best of you. Consider the history of the stock and whether or not the reason for the dip is something that could soon pass. If you panic and sell because of a headline, you could regret it next month when that dip turns into a spike.
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Emotional intelligence is a skill sought by many employers. Here's how to raise yours.
- Daniel Goleman's 1995 book Emotional Intelligence catapulted the term into widespread use in the business world.
- One study found that EQ (emotional intelligence) is the top predictor of performance and accounts for 58% of success across all job types.
- EQ has been found to increase annual pay by around $29,000 and be present in 90% of top performers.
The achievement is an important milestone in quantum computing, Google's scientists said.
- Sycamore is a quantum computer that Google has spent years developing.
- Like traditional computers, quantum computers produce binary code, but they do so while utilizing unique phenomena of quantum mechanics.
- It will likely be years before quantum computing has applications in everyday technology, but the recent achievement is an important proof of concept.
How quantum computers differ from traditional computers<p>Like traditional computers, quantum computers produce binary code to execute computing functions. But instead of using transistors to represent the ones and zeroes, as traditional computers do, quantum computers like Sycamore use quantum bits, or "qubits."</p><p>Qubits are extremely tiny pieces of hardware that act like subatomic particles, utilizing quantum phenomena like entanglement, superposition, and interference. Qubits can represent ones and zeroes. But thanks to superposition, qubits are also able to represent multiple states at the same time, meaning they can make calculations much faster than traditional computers. That's what helped Sycamore recently outperform a supercomputer.</p><p>Sycamore achieved "quantum supremacy," which occurs when a quantum computer can do something that a traditional computer cannot. To pass this benchmark, Google engineers pit Sycamore against the world's leading supercomputer, Summit, which is housed at Oak Ridge National Laboratory in Tennessee.</p><p>"Summit is currently the world's leading supercomputer, capable of carrying out about 200 million billion operations per second," William Oliver, a physicist at the Massachusetts Institute of Technology, wrote in a <a href="https://www.nature.com/articles/d41586-019-03173-4" target="_blank">"News and Views" piece</a> for <em>Nature</em>.</p><p>But the contest between Sycamore and Summit involved a highly specific task, one that was specifically designed to give a competitive edge to a quantum computer like Sycamore.</p>
Beating the world's leading supercomputer<p>The task involved estimating how likely it was that a processor would produce some "bitstrings" more often than others. As you continue to add information to the equation, it becomes exponentially difficult for traditional computers to conduct the calculations. (You can read more about the experiment <a href="https://ai.googleblog.com/2019/10/quantum-supremacy-using-programmable.html" target="_blank">here</a>.)</p><p>"We performed a fixed set of operations that entangles 53 qubits into a complex superposition state," Ben Chiaro, a graduate student researcher in the Martinis Group, which conducted the experiment, told <em><a href="https://www.sciencedaily.com/releases/2019/10/191023133358.htm" target="_blank">Science Daily</a></em>. "This superposition state encodes the probability distribution. For the quantum computer, preparing this superposition state is accomplished by applying a sequence of tens of control pulses to each qubit in a matter of microseconds. We can prepare and then sample from this distribution by measuring the qubits a million times in 200 seconds."</p><p>"For classical computers, it is much more difficult to compute the outcome of these operations because it requires computing the probability of being in any one of the 2^53 possible states, where the 53 comes from the number of qubits -- the exponential scaling is why people are interested in quantum computing to begin with," Brooks Foxen, another graduate student researcher in the Martinis Group, told <em>Science Daily</em>. "This is done by matrix multiplication, which is expensive for classical computers as the matrices become large."</p><p>But the specific nature of this task has led some to question the utility of quantum computers like Sycamore.</p><p>"One criticism we've heard a lot is that we cooked up this contrived benchmark problem—[Sycamore] doesn't do anything useful yet," Hartmut Neven, a Google engineering director said at a press event on Wednesday. "That's why we like to compare it to a Sputnik moment. Sputnik didn't do much either. All it did was circle Earth. Yet it was the start of the Space Age."</p>
A proof of concept for quantum computing<p>Although it could be decades until we see quantum computing powering everyday devices, Sycamore serves as a proof of concept that there exists a form of computing that has the potential to be vastly superior to traditional computing.</p><p>"This demonstration of quantum supremacy over today's leading classical algorithms on the world's fastest supercomputers is truly a remarkable achievement and a milestone for quantum computing," Oliver wrote in his piece for <em>Nature</em>. "It experimentally suggests that quantum computers represent a model of computing that is fundamentally different from that of classical computers. It also further combats criticisms about the controllability and viability of quantum computation in an extraordinarily large computational space (containing at least the 253 states used here)."</p>
A study published Friday tested how well 14 commonly available face masks blocked the emission of respiratory droplets as people were speaking.
- The study tested the efficacy of popular types of face masks, including N95 respirators, bandanas, cotton-polypropylene masks, gaiters, and others.
- The results showed that N95 respirators were most effective, while wearing a neck fleece (aka gaiter) actually produced more respiratory droplets than wearing no mask at all.
- Certain types of homemade masks seem to be effective at blocking the spread of COVID-19.
Fischer et al.<p>A smartphone camera recorded video of the participants, and a computer algorithm counted the number of droplets they emitted. To establish a control trial, the participants spoke into the box both with and without a mask. And to make sure that the droplets weren't in fact dust from the masks, the team conducted more tests by "repeatedly puffing air from a bulb through the masks."</p>
Fischer et al.<p>The results, published Friday in <a href="https://advances.sciencemag.org/content/early/2020/08/07/sciadv.abd3083" target="_blank">Science Advances</a>, showed that some masks are pretty much useless. In particular, neck fleeces (also called gaiters) actually produced more respiratory droplets compared to the control trial — likely because the fabric breaks down big droplets into smaller ones.</p><p>The top three most effective masks were N95 respirators, surgical masks, and polypropylene-cotton masks. Bandanas performed the worst, but were slightly better than wearing no mask at all.</p>
Fischer et al.<p>Research on mask efficacy is still emerging. But the new results seem to generally align with <a href="https://newsroom.wakehealth.edu/News-Releases/2020/04/Testing-Shows-Type-of-Cloth-Used-in-Homemade-Masks-Makes-a-Difference" target="_blank" rel="noopener noreferrer dofollow">prior tests</a>. For example, a study from June published in <a href="https://aip.scitation.org/doi/10.1063/5.0016018" target="_blank" rel="noopener noreferrer dofollow">Physics of Fluid</a> found that bandanas (followed by folded handkerchiefs) were least effective at blocking respiratory droplets. That same study also found, as <a href="https://newsroom.wakehealth.edu/News-Releases/2020/04/Testing-Shows-Type-of-Cloth-Used-in-Homemade-Masks-Makes-a-Difference" target="_blank" rel="noopener noreferrer dofollow">others have</a>, that masks made from multiple layers of quilter's fabric were especially effective at blocking droplets.</p><p>The researchers hope other institutions will conduct similar experiments so the public can see how well different masks can block the spread of COVID-19.</p><p style="margin-left: 20px;">"This is a very powerful visual tool to raise awareness that a very simple masks, like these homemade cotton masks, do really well to stop the majority of these respiratory droplets," Fischer told CNN. "Companies and manufacturers can set this up and test their mask designs before producing them, which would also be very useful."</p>
Sharing QAnon disinformation is harming the children devotees purport to help.
- The conspiracy theory, QAnon, is doing more harm than good in the battle to end child trafficking.
- Foster youth expert, Regan Williams, says there are 25-29k missing children every year, not 800k, as marketed by QAnon.
- Real ways to help abused children include donating to nonprofits, taking educational workshops, and becoming a foster parent.
Real ways you can help stop child trafficking<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="21fc2dc85391501eec28c4bf46d7db15"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/AXL0q9jNZGU?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>Williams is the founder and CEO of <a href="http://www.seenandheard.org/" target="_blank">Seen and Heard</a>, a Los Angeles-based nonprofit that helps foster youth develop character through the performing arts. She's been involved with foster youth for years; I <a href="https://bigthink.com/politics-current-affairs/child-sex-trafficking" target="_self">wrote about her work</a> in child trafficking just over a year ago. Tragically, since that time, the situation for these children has only gotten worse, in large part because of QAnon.</p><p>Williams says child trafficking is an easy cause to rally people together. Fear is also a powerful unifying force, one that QAnon believers are already primed for via the news they consume. Almost every parent cares about their children, making them the ideal target to solidify groups. </p><p>The real problem, she says, is that the youth she works with are falling for these conspiracy theories. Trauma is a particularly powerful tool for indoctrination. If you're a teenager that's been abducted or abused, your trust level is already extremely low. Then you read about a global cabal of powerful men (and a few women) secretly abusing children, and the narrative seems ready-made for your personal history.</p><p>When Williams tried to "lovingly and kindly correct" the youth she was working with after learning about the Wayfair conspiracy, the girls' response was, "well, who owns the media?" </p><p style="margin-left: 20px;">"She goes from this small little thing to a QAnon talking point. I've been thinking about why she would believe such a preposterous idea—and there are others; it's not just one student, and they're in in deep. I think that when something horrific happens to you as a child, it's a lot easier to distance yourself from the immediate reality that it was an uncle or a parent or a sibling that hurt you. By detaching from that immediate person, they project it onto Bill Gates or Chrissy Teigen. Then it's not so personal, it's global." </p>
A man wear a shirt with the words Q Anon as he attends a rally for President Donald Trump at the Make America Great Again Rally being held in the Florida State Fair Grounds Expo Hall on July 31, 2018 in Tampa, Florida.
Photo by Joe Raedle/Getty Images<p>As Williams mentions, there are over 30,000 kids in foster care in the Los Angeles area alone. It's easy to fall through the cracks. The systems in place aren't perfect; they're certainly underfunded. When you're in a system trying to support you yet isn't capable of doing so, viewing the world as imperfect, and even harmful, becomes the lens through which you see reality. Again, this makes for a perfect indoctrination tool.</p><p>One popular QAnon talking point is that 800,000 children are missing. As Williams says, child trafficking experts "don't buy this for a minute." The number makes for a good meme but a poor representation of the problem. </p><p>To source better data, Williams turns to the <a href="https://www.missingkids.org/" target="_blank">National Center for Missing and Exploited Children</a> (NCMEC) and the <a href="https://www.fbi.gov/services/cjis/ncic" target="_blank" rel="noopener noreferrer dofollow">National Crime Information Center</a> (NCIC). An important factor when reading data: if a teacher <em>and</em> a caregiver report a missing child to NCIC, that counts as two children, not one, which accounts for some of the fluctuations in numbers. In total, between 25,000 and 29,000 kids go missing every year. Importantly, 94 percent of those children are recovered within four to six weeks. </p><p style="margin-left: 20px;">"They're not documenting the recovery rate. It's not like these numbers are perpetually hanging out there. So this 800,000 number is just ludicrous." </p><p>Williams compares what's going on to Black Lives Matter. Blacking out your Instagram profile picture is performative. It signals that you actually care, which is great, but if you're not supporting Black-owned businesses, for example, there are no teeth to your activism. </p><p>Of course, blacking out your profile doesn't cause the real-world harm the QAnon virus does. Sharing misinformation is ultimately harmful to the children in need of help. Williams offers the resources below—ranging from donations to nonprofits to educational trainings to becoming a foster parent—for people that actually want to do something to help victims of sexual and physical abuse. They might not make a great Twitter meme, but in the actual world, this support makes all the difference. </p><p><strong>To report abuse/neglect, call the child abuse hotline: 800.540.4000 (LA county) / 800.422.4453 (National)</strong></p><ul><li>Support anti-trafficking organizations by donating to <a rel="noopener noreferrer dofollow" href="http://savinginnocence.org/" target="_blank">Saving Innocence</a>, which runs the continuum of care from rescue to recovery, <a href="http://gozoe.org/" target="_blank" rel="noopener noreferrer dofollow">Zoe</a>, a reputable faith-based organization, and <a rel="noopener noreferrer dofollow" href="https://withtwowings.org/" target="_blank">Two Wings</a>, which helps to rehabilitate female survivors</li><li><a rel="noopener noreferrer dofollow" href="http://www.nolabrantleyspeaks.org/" target="_blank">Nola Brantley</a> offers in-person and online trainings to help combat the commercial sexual exploitation of children</li><li><a rel="noopener noreferrer dofollow" href="http://instagram.com/imrebeccabender" target="_blank">Rebecca Bender</a> is a trafficking survivor that runs "Myth Busters," which combats conspiracy theory disinformation</li><li>The <a href="https://www.instagram.com/missingkids/" target="_blank" rel="noopener noreferrer dofollow">National Center</a> of Missing and Exploited Children</li><li>Operation <a href="https://www.instagram.com/ourrescue/" target="_blank" rel="noopener noreferrer dofollow">Underground Railroad </a></li><li><a href="https://www.instagram.com/defendinnocence/" target="_blank" rel="noopener noreferrer dofollow">Defend Innocence</a> offers tips for parents and caregivers to keep kids safe</li></ul><p><span></span>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a>, <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank">Facebook</a> and <a href="https://derekberes.substack.com/" target="_blank">Substack</a>. His next book is</em> "<em>Hero's Dose: The Case For Psychedelics in Ritual and Therapy."</em></p>