The sky is falling down

Tuesday, 9th August 2011 15:22 - by Resident IFA

Well, it certainly seems that way. In Personal Finance terms, it is obvious to me that we are all extremely concerned and worried by the stock-market events of the last few days. I very much include myself in this fretful bracket. When you consider that the FTSE100 has set the unwelcome record of 4 three-digit point falls in consecutive days, then you have the makings of colossal financial carnage. I have a couple of Clients currently moving through the process of purchasing annuities (retirement income) via vesting their Pension plans. Understandably, I will look at 'Plan B' for these Clients if their fund values have dropped substantially over the last few days. Of course, this plan could take the form of 'sit & wait'. At times like this, a Crystal Ball would be handy to own. Most of my Clients understand the pointlessness of selling-out whilst markets are falling, and trying to 'time' their way back into the market. I remember seeing a statistic espousing the idea that you would lose approximately 50% of your growth if you were out of the stockmarket on the best 5 days in the last 10 years...or similar. So, it is best to sit tight. The stockmarket lessons of the last 30 years - and especially the last 4 - dictate that what goes down tends to rise up. Well, at least that has been the case. There is enough economic and financial uncertainty in the world to be classed as a fool, were I to suggest markets will not fall further. One happy camper posted on LSE earlier today that they see the 3,500 point level coming before the next rise. Let's hope not! It seems that we are still reaping what was financially sown over the last 10-15 years. I am not pleased to be proved right, but I predicted a 'Meltdown: Part 2' would come, as far back as 2009. There were just too many rotten apples festering at the bottom of the barrel for another round of pain, aka stockmarket plunges, to stay away. This said, there are still good, well-run companies out there. In fact, it could be the time - when share and fund values are depressed - to buy more...after checking fundamentals, researching, etcetera! Warren Buffet, the Investing Sage, once said of his company's approach: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." If you believe this...and that markets will once again rise in the future...you will at least sit tight for now (if not requiring money in the near-future). To evoke memories of WWII, 'Keep Calm And Carry On'! Now, don't start me on the riots...