Read Part 1 (Stock Market Crash? Your Options Explained)
So what should investors do?
Well, if you don't need your invested capital now (or within 1-3 years) our advice is to hang on. Don't turn paper losses into real losses by selling low. We have seen new clients tell us that they have sold when the markets went down, and bought again when they went up.
Well, they simply felt that this was the 'sensible' thing to do.
This is the classic way for investors to lose money, time after time. For example, if you had missed the best 25 days out of the 7,300 days between 1986 and 2006, your compound annual returns would be 6.72% instead of the 11.74% the market returned.
Here is a recent article that discusses these issues:
The old adage of buy and hold is very true. If you do not need the money our advice is to hang on.
Perhaps inaction is a better way of putting it - ride out the storm.
If the volatility has really upset you, then revaluate if you should be reducing your risk here, or should you be in the stock market at all?
By : Ray Prince
Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives. Just visit http://www.medicaldentalfs.com to get your free retirement planning guide. Rutherford Wilkinson plc is authorised and regulated by the Financial Services Authority.