None of us will forget the economic collapse of 2008 and the subsequent difficulties in 2009. But while the value of investors’ portfolios dropped significantly, the experience itself is valuable - because we can all learn something from it. Here are a few “lessons” to consider from the recent economic meltdown.

Review your risk tolerance regularly
Many people thought they could handle a given level of investment risk, only to find themselves greatly worried over mounting losses. With markets recovering sharply in 2009, now is a great time to put the concept of “risk” into perspective.

Understand the risk/reward characteristics of your investments
Even if you were investing within your risk tolerance, you may have been surprised by the volatility of some of your holdings. It’s essential to understand the best and worst-case scenarios for your aggregate investments as well as the risk/reward characteristics of each investment you own.

Maintain realistic expectations
During the 1980s and 1990s, with occasional interruptions, investors were spoiled by an extraordinarily robust stock market. By planning for more modest returns in the future, you’ll be setting more realistic and achievable financial goals.

Build an emergency fund
With unexpected expenses, such as a new furnace or a medical bill, a prudent investor should never be forced to liquidate long-term investments to cover the unanticipated cost. It is essential to build an emergency fund of cash containing six to 12 months’ worth of living expenses.

Borrow wisely
As we emerge from the downturns in the financial and housing markets, it will be important to borrow wisely. The right loans can actually help you boost your liquidity and reduce your risk exposure. For example, with interest rates at historically low levels, consider refinancing your mortgage.

Think long term - but prepare for the short term
It’s always a good idea to base your investment strategies on long-term goals, such as a comfortable retirement. To achieve these goals, you’ll want to build a portfolio, make adjustments as needed - and then let your investments do the work over a period of time. At the same time, if you know you’re going to need a sizable amount of money within the next few years - perhaps for college tuition, a wedding or a down payment on a vacation home - you’ll want to place some money in vehicles that can preserve principal, such as cash, CDs or money markets.

Seize the opportunity
As legendary investor Sir John Templeton once said, “It’s only common sense to prepare for a bear market.” As the turnaround in 2009 has proven, often the best investment opportunities present themselves after the financial markets have been pummeled.

John Sammut helps individual investors, families and corporations protect their purchasing power and improve investment results. You can reach Sammut by telephone at (800) 343-3036, or visit him at johnmsammut.com

This article is provided by John Sammut, a financial consultant with RBC Wealth Management in Syracuse, N.Y., and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.

RBC Wealth Management, a division of RBC Capital Markets Corporation, Member NYSE/FINRA/SIPC