What To Do In Volatile Stock Market Conditions?February 2008: In volatile stock market conditions like these, what should an investor be doing? The answer to that question is entirely dependant upon theindividual and their circumstances. Sorry, but in finance, very few things are simple... The short term investor, those with a time-frame of perhaps 18months or less until they plan to remove money from the markets,should seriously consider lowering their exposure - this meansselling something and banking the cash. Please don't think I amsuggesting 'panic selling'. In a higher risk market, it would be wise to have less involved. In truth, the warning signs have been there for all to see for some time. I recall suggesting such action several months ago in this very newsletter. For those with a longer term perspective, a little selling might be in order. If you follow this course of action, the higher riskassets would probably be the ones to trim. Those who are saving each month into the market and have atime-frame of at least three or four years need to take very little action. If you just keep saving each month, and prices fall, you will be buying units at more attractive prices than you have been. Long-term stock market prognostications are ridiculously difficult to make and very unlikely to have no relation to the future reality. As such, investors need to decide why they are saving and whether a medium-term fall in asset prices will help or hinder their progress towards that goal. If your portfolio is quite high risk, perhaps it should have a little rebalancing, but otherwise, just keep saving. This post was first sent to my newsletter list on 5th February 2008.
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