Four tips for investors as FTSE enters bear market

As the FTSE 100 enters a bear market, I would have been on featured by BBC News urging investors not to panic sell, consider the buying opportunities, ensure portfolios are well diversified and to keep ‘some power dry.’

With London’s leading share index falling by 3.5 per cent this week, a fifth below the previous high, it has now entered into a bear market.
As I was quoted as saying, to my mind, the subsequent panic is somewhat overstated.  Investors must focus on the bigger picture.  Looking at the global economy, it’s growing around 3 per cent, and despite the slowdown in China – which is the centre of the majority of the recent sell-offs – growth and strong consumption are still evident, making the second largest economy in the world look relatively stable.

As such, in light of the sell-off, I have four tips for investors.

First, don’t panic sell.  The optimum way to generate and grow wealth for investors, typically, is to focus on long-term stock ownership.    The markets tend to go up over long periods of time, making them fairly predictable, therefore a prudent strategy would be dollar/pound cost averaging.

Second, investors should contemplate the important buying opportunities that are now available.  The sell-off is creating good value in high-quality companies, so stocks are priced attractively but maintain their underlying value.

Third, portfolios must be well diversified, covering regions, sectors and asset classes.  This offers investors protection, helps to sidestep risk and make the most of the inevitable upside.

Fourth, as I mentioned earlier, keep some power dry.  Investors should always have some cash available to be ready to use should a clear market trend arise.

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