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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 event forced many investors to find income from “bond surrogates” investments such as high-yield bonds, high dividend paying stocks, real estate and levered loans. The proliferation of these strategies and products brought various risks to investors such as expensive valuations, liquidity issues, and regulatory changes. The international and U.S. Banks have tougher capital rules introduced by governments, reducing 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. Be skeptical about the new product you are investing. The credit markets’ record set of innovations presaged the 2008 economic crisis. What might have been a contained real estate correction in a larger financial collapse are magnified by collateralized debt obligations, increased leverage and sub-prime asset-backed securities. At present, we see a lot of new alternative products, asset classes and strategies, all with their own risks. You need to plan ahead to prevent being forced from selling when market liquidity will dry 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. You must still look for warning signs in terms of failure to appreciate investment risk and market valuation.

The 2008 economic crisis serves as a reminder for American investors to embrace investment strategies that can withstand the test of time. Investors must heed the important lessons of history to be able to create a portfolio that can withstand the challenges of tough markets, respect the past and open great 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. It is important to ask the person managing the financial aspects of the business you are planning to invest in. A company can fail because of managers that are less than above the board with their dealings. Do not fall on different get-rich-quick schemes or overnight wealth schemes out there.

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