Reality Check 2017: How Can Average Americans Survive Another Market Crash
The U.S. Federal Reserve in 2008 economic crisis prompted to pump massive dollar stimulus into the economy, shifting pushed bond yields to their lowest point in seventy-five years. This situation forced a lot of investors to seek income from “bond surrogate” investments like high-yield bonds, high dividend paying stocks, real estate and levered loans. With the proliferation of these products, it has brought different risks to investors such as regulatory changes, expensive valuations, and liquidity issues. Stricter capital rules are introduced by governments on U.S. and international banks in order to lower the chance of bank failures in the future.
For the average American investor, there are things you can apply today so you will be able to survive another market crash if it does happen. When approaching a new product, be skeptical of what you are investing. The credit markets’ record set of innovations presaged the 2008 economic crisis. Collateralized debt obligations, increased leverage and sub-prime asset-backed securities magnified a contained real estate correction into a wider financial collapse. All with their own risks, we see a lot of new alternative products, asset classes, and strategies t present. Planning ahead is important so you’re not forced to sell when the liquidity of the market dries up. Avoid being forced to sell securities at sale prices by owning high-quality investments, and utilization of effective and diversified high-quality fixed income investments that are mixed with appropriately priced stocks. You must be aware of different debt levels impacts that can adversely affect markets. You don’t have to panic or sell your securities when the outlook is not good as long as you have an adequate financial plan because markets will recover. Look for warning signs in terms of market valuation and failure to appreciate investment risk.
The 2008 economic crisis serves as a reminder for American investors to embrace investment strategies that can withstand the test of time. It is crucial for investors to learn from the lessons of history, creating a better portfolio that can withstand the challenges of tough markets, respect the past and open great business opportunities of the future. It is not good to invest in a company just because of it net assets, you need to also closely monitor those assets if they were brought or earned like mergers or acquisitions. Look at the board of directors of the company as well as upper level management. It is essential to know the person managing the financial aspects of the investment or business you’re planning to venture in. A company can fail because of managers that are less than above the board with their dealings. There are many any get-rich-quick schemes or overnight wealth schemes out there that you need to be cautious of.