How can investors protect themselves from another financial collapse?

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How can investors protect themselves from another financial collapse? by Mind Map: How can investors protect themselves from another financial collapse?

1. After understanding what is market volatility, I can state strategies in order to lessen the impact of volatility on people's lives . Such as the strategy of investors dividing up their money in to different areas/stocks/companies. Also the options of Trade, Mutual, and Hedge funds as well as their positives and negatives. ETF's or exchange traded fund are also an option for investors.

1.1. Stock diversification is an important technique that that will help reduce the risk of market volatility, as Jen Wieczner also states in her article "So all I want to do is invest in a number of business that aren't correlated with each other" since different companies react differently to daily events. Investors have to keep in mind not to put all their eggs in one basket, and invest in different fields.

1.2. Mutual funds are a great option for investors looking to diversify their portfolio as James Anderson states "turning to mutual funds with solid management and good long-term track records will prove to be the favorable course for most investors"(Anderson)

1.3. Hedge funds is also an option for investors. Hedge funds is done by a professional firm that takes capital, that is pooled together from different investors, and invest in a different markets. Hedge funds are safer since these firms use advanced financial instruments to help them invest. The down side of Hedge funds are the fact they are tailored made for accredited investors, and not for the general public.

2. First Idea would be for investors to spot or feel the effects of an incoming market collapse. Im thinking of beginning the paper with what is market volatility, what could be the causes or from where those causes may be coming from. Either wars, terrorist attacks, political events.

2.1. How did the market react after the 2008-09 crash? AS James Anderson states "Markets were full of splash, spectacle, and drama"(Anderson) because of this investors were afraid to invest. Next for Investors had to learn how to invest their money better.

2.2. What can be some of the causes of market volatility? Investors have to pay attention to everyday news. Events can have a tsunami type effect on the market, as the results may be felt soon after. From company mergers, competitors gaining momentum, to CEO's resigning or quitting can all have impacts on the market itself.

2.3. Investors who are looking to invest in companies also look at the company itself, as B. Borzykowski states in his article people should"make sure they're buying businesses with clean balance sheets...the firm should still be earning money;dividends meet to be covered" which tells investors to learn about the company first and do some background research .

3. Investors should learn to look at the risk the investment posses and the reward it can have. From personal experience I have been following a number of stock companies, for example Tesla Motors , after a rapid growth in the prices of the shares, reached it's peak in early September and has since dropped by about 18%.

4. There is the fact that market volatility will always happen, so there are ways to deal with volatility. I would state the options I have read from the articles that include either selling your shares, holding on for a while to see if the market recovers or as some investors do is buy more of the shares as their prices drop.

5. An investor can follow different type of techniques when looking for potential markets. As Bryan Borzykowski states "what to buy depends on what type of investor you are: conservative, middle-of-the-road or aggressive". The conservative approach would be the best one for an investor who's playing safe and should be prepared to hold their investments for the long term. Investors nearing or past the end of their working lives should look for corporate bonds, short-term bonds, as well as holding blue-chip, dividend-paying companies. As B. Borzykowki states "Blue-chip stocks mean large companies that grow slowly... they aren't hit as badly during downturns"(Borzykowski)

5.1. Conservative investors have plenty of highly rated companies, many have AA ratings, but companies like Exxon Mobil, Microsoft, Johnson & Johnson and Automatic Data Processing have the coveted AAA stamp from Standard & Poor's.