2017 Reality Check: How Your Business Can Survive Another Market Crash
The economic crisis in 2008 prompted the U.S. Federal Reserve to pump massive dollar stimulus into the economy, that shifted 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. 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.
There are things average American investors can do to be able to survive another market crash if it does happen. When approaching a new product, be skeptical of what you are investing. The 2008 economic crisis was presaged by credit markets’ record set of innovations. 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 see a lot of new alternative products, asset classes, and strategies t present. You need to plan ahead to prevent being forced from selling when market liquidity will dry up. Prevent selling securities at relatively low prices by owning high-quality investments and utilizing diversified and effective high-quality fixed income investments 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. It is best to still look for warning signs in terms of market valuation and failure to appreciate investment risk.
The economic crisis in 2008 is a reminder for the average American investor 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. Of course you don’t want to invest in a particular company just because of what appears to be net assets so consult a fee only financial planner to get a professional advice on the best ways to make investments. 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. 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.