FTSE 100 enters bear market – four tips on how to navigate the volatility

21st January 2016

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On Wednesday the FTSE 100 index of the UK’s top firms fell into bear market territory as it dipped 3.5% and collapsed below the 5,685 mark – some 20% below its peak.

However experts are urging investors not to panic sell but instead consider the buying opportunities, ensure portfolios are properly diversified, and keep some powder dry.

On Thursday by 11:50am the index had already moved back to 5,698.53.

Nigel Green, chief executive of financial adviser deVere Group said: “We need to see the bigger picture.  For instance, the global economy is growing around 3%; and whilst China’s economy – which is the focus of so much of the recent sell-offs – has slowed, there’s still growth, strong consumption, and indeed the world’s second largest economy does look relatively stable.”

In light of the sell-off, he is urging investors to do four things…

Do not panic sell

For most investors, it should currently be a case of ‘keep calm and carry on.’   Long-term stock ownership is, typically, the best way to create and grow wealth for investors.  Stock markets can be fairly predictable over long periods of time.  They tend to go up over multi-year time periods. With this in mind, a sensible strategy is dollar/pound cost averaging.

Look at the opportunities

Consider the important buying opportunities that are now being presented. The sell-off is creating good value in some high-quality companies.  Opportunity knocks in such stocks as the underlying value remains and the prices are attractive.

Ensure your are diversified

Ensure portfolios are well diversified across asset classes, sectors, and regions.  This will offer protection, help mitigate risks and allow investors to take advantage of inevitable upsides.

Stash some cash

Keep some powder dry.  Keep cash at the ready and be prepared to use it should a clear trend establish itself.

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