As the FTSE 100 enters a bear market, investors are being urged not to panic sell, consider the buying opportunities, ensure portfolios are properly diversified, and keep some powder dry.
The comments come from Nigel Green, chief executive and founder of financial advisory organization deVere Group.
The tips come as the London’s leading share index fell by 3.5 per cent on Wednesday.
Green says: “The FTSE 100 has slumped by 3.5 per cent, taking it more than a fifth below its last peak, and putting it in bear market territory.
“However, the panic is being overdone. We need to see the bigger picture. For instance, the global economy is growing around 3 per cent; 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.”
He continues: “In light of the sell-off, I would urge investors to do four things.
“First, 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.
“Second, 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.
“Third, 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.
“Fourth, keep some powder dry. Keep cash at the ready and be prepared to use it should a clear trend establish itself.”