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Reality Check 2017: How Can Americans Survive Another Market Crash

In 2008, the economic crisis prompted the U.S. Federal Reserve to pump massive dollars stimuli into the market economy, that shifted pushed bond yields to their lowest point in seventy-five years. This forced many investors to shift from bond surrogate investments like real estate, high-yield bonds, high dividend paying stocks, 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. Capital rules became tougher on international and U.S. banks, reducing the chance of bank failures in the future.

The average American investors can learn from the lessons brought about by the 2008 economic crisis and they can also be applied today to be able to survive another market crash if it does happen. It is important to be skeptical of the new products you are investing. The credit markets’ record set of innovations presaged the 2008 economic crisis. Increased leverage, subprime asset-backed securities, and collateralized debt obligations magnified a contained real estate correction into a wider financial collapse. All with their own risks, we can see many new alternative asset classes, products and strategies. 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. Provided that you have an adequate financial plan, you don’t have to panic in selling your securities when the outlook is not good. It is best to still look for warning signs in terms of market valuation and failure to appreciate investment risk.

The 2008 economic crisis is a reminder for average American investors to embrace investments 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. Consult a fee only financial planner to get a professional advice on the best ways to make investments because of course, you don’t want to invest in a particular company just because of what appears to be net assets. Look at the board of directors of the company as well as upper level management. Ask the person who manages the financial aspects of the business you are planning to invest in. If managers are either less than above board or inept in their dealings, a company can quickly fail. Do not fall on different get-rich-quick schemes or overnight wealth schemes out there.