The Stock Market Crisis - What it means for you... Don't Panic!

We're All Doomed

As Dad's Army's Private Frazer would say - "We're all doomed!"

It is easy to see why this apocalyptic view might be held. Recent days have seen further volatility and significant falls on the stock markets in the UK and Europe. Thursday saw the main European indexes fall sharply, with around 5% wiped off the value of the markets.

The world is in a "danger zone", according to World Bank President Robert Zoellick.

The global economic situation is entering a "dangerous place", so says IMF head Christine Lagarde.

The current crisis has arisen as a result of the Eurozone debt crisis, concerns for the UK economic outlook and US Federal Reserve's grim warning about the state of the US economy.

So how will the current stock market crisis affect you and what can you do about it?

Don't PanicRather than listening to Private Frazer, instead we should all heed the words of Lance Corporal Jones - "Don't Panic!!!"

Mike Wall, Mitchell Charlesworth's Pensions and Investments expert explains in these top tips why it is not yet the time to believe the pessimists and doomsayers:

Tip 1 - Keep your investment horizons appropriate:

Don't Panic. Investments and Pensions are generally for the long term. Whilst there are daily fluctuations and high levels of volatility at the moment, these should not worry investors too much if you keep your horizons appropriate. The media rarely reports when values are going up.

Tip 2 - Don't leave the market based on fear:

If you have money invested in the stock market, you should not leave the market based on anxiety. If you sell now (even if your initial capital has depreciated) then you will crystallise your losses. It is easy to get swept up in the current climate of negativity generated by the media, but 'short termism' will ultimately leave you worse off in the future.

Tip 3 - Stock market investments should be for the long haul:

If you invest in the stock market, then you must be aware that this is a long term investment and rarely a 'quick win'. You should plan to leave your investment alone for a minimum of 5 years but 10 is a better time-scale to see a return on your assets.

Tip 4 - Plan your retirement exit strategy:

You should start to plan your retirement strategy at least 5 years prior to retiring. This will help you avoid getting stuck in a negative situation when you finally decide to leave work and cash in your pension. If you are planning to retire in the next 5 years, now is the time to start the move from risk based assets (the stock market) to less volatile funds (cash).

Tip 5 - Be Brave:

Rather than believing the sensationalist negative hype, you could seize the moment and actually purchase more stocks and shares. If you are experiencing losses, try "Pound Cost Averaging" whereby  you buy when the market is volatile (low) to reduce the average break-even price of your shares. As Warren Buffet once said; "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

What if you are about to retire in the very near future?

If you are about to retire in the very near future then it is true that the turmoil on the financial markets, especially falling shares values, will have affected you if have had money saved in personal pension plans and now want to cash these in to buy an annual pension, otherwise known as an annuity.

This is a difficult situation but - all is not lost.

Mike Wall explains, "Come and see us immediately. We will evaluate risk reduction strategies and alternative options. These might include fund switching or evaluating different pension providers on the open market with better annuity options."

For more advice, contact Mitchell Charlesworth's pensions and investments team on tel: 0151 255 2300 or email:

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