By ADRIAN LOWCOCK 04/05/2010
It is very easy to make money when share prices are rising, but when the stock markets head south and your portfolio values take a tumble, it is much harder to make rational decisions. Before reacting to the falls we have seen during the last couple of weeks, we want to remind you of five lessons learnt during the credit crisis:
Do not panic
Falling stock markets make investors more nervous and unsure of the decisions they have made. Whilst it is human nature to question this, reacting to such emotions can have significant consequences, with investors selling at the bottom when uncertainty is at its peak.
Review your objectives
When unsure whether your investments are appropriate, you should take some time out to reassess your investments, look at them objectively and decide if they are still valid. For most people it is unlikely that their objectives will have changed and it is more likely to their perception of risk has increased.
Rebalance your portfolio
Once you have re-established your investment objectives, use this opportunity to ensure that your portfolio is well diversified. This may involve selling some investments and buying other asset classes. Keeping a balanced portfolio will help deliver long term performance and short term volatility will be less of a concern to you.
Invest new monies
Whilst it should be obvious to buy when markets are lower, investors frequently wait until their confidence returns and markets have recovered. It is difficult to get the timing right, therefore invest through monthly savings instead of a lump sum.
Talk to your adviser
Speaking to a professional investment adviser will help you identify your objectives and put things into perspective. It may well result in taking a different course of action than you had originally anticipated, but most importantly, an adviser will make sure you are well positioned to achieve your goals.
If there is anything you wish to discuss regarding this article please call one of our Investment Professionals on 020 7189 9999.