How did all this?
The answer is complex but I will try to make it as simple as possible. Many banks, for wanting more profit (greed), mortgage loans to many low-income (and bad credit), knowing that these will be very difficult to pay the mortgage (Sub-Prime Lending). These people entered the contract with special offers that lasted about five years with low interest (Adjustable Rate Mortgage Loans), after five years of interest (and therefore monthly payments) increased as customers could not meet the payments. 1 in every 100 homes are estimated to have been millions of them, are being seized as www.consumeraffairs.com in a report made in February 2008. These loans were secured by the money from finance companies that serve as collateral for payment of loans (Freddie Mac, Fanny Mae which tenial money Lehman Brothers, Bear Stearns who were insured by AIG). This caused a domino effect on the market in which mortgage companies, insurers of the mortgages and people who invested in these companies lose a lot of money. Less money, fewer jobs, the same charges, plus debt, pandemonium! Add to this equation the rise of oil and the fall of the automotive market (less work, less money to spend).
What happens to money in my bank?
The money in a deposit account (Savings, Current, certificates of deposits) are insured by the government to a limited quantity. In the United States says the FDIC up to $ 100,000 per person in Spain ensures you the FGD 20,000 Euros per account, per bank. This does not mean that if you lose more, but what will happen is that they sold the bank was broken and divided the rest among those owed money.
And what happens as my investments?
Your investments are other five, they are not insured. Usually people who have investments in the stock market (for retirement or planning for long-term) is invested in an investment fund that is diversified but are seriously affected by the market. If you have money in the bag and is an investment fund (mutual fund) is recommended as it still and do not let you make your money, even when you’re losing. The stock market will always have its ups and downs, but eventually always recovers. Many people recommended it to invest more now that the stock market is almost on the floor as this will help you buy more shares with your money when the stock market back to normal you’ll have a lot of money. Consult your broker or do your research needed before making a decision (the internet is a great tool.)
I am losing a lot of money. What do I do?
If you are about to retire (or reaching your goal to get your money in the bag), you should move most of your investments into bonds meantime. If you plan to use this money for many years here, do not worry, keep your investment strategy and constant at the end of the day you win money, no longer see your investment fund is performing so often.
And the worst has happened, right?
The answer is NO. Will spend a lot of things before we go to see the economic market rising again. Speculators predict that many companies will have to create a merger to handle the losses (eg JP Morgan and Bear Stearns). Many jobs will be lost which will cause less buying and selling. Also the price of houses will be reduced in order to be sold, many people will be losing money for the market to stabilize.
What do you think? Leave a comment.