Look at how well you have spread your investments both on a geographic and asset class basis. Have you got too much in riskier asset classes such as equities? And remember if you’re sitting on gains it is never wrong to realise some of those gains and re-invest in another stock or fund to help diversify your risk.
This is easier said than done and you need to do your research, but consider investing in assets such as Gold or Infrastructure.
If you’re sitting on a lump sum in cash that you’re considering investing then don’t put it all in one go. Timing the market is maddeningly difficult but regular investing or drip feeding into the stock market can help reduce the risk that a market fall reduces the initial amount you invested before you even get going.
Whilst the active/passive debate continues the reality is that index trackers will only perform in line with benchmark indices. Therefore, if there is a sell-off in the markets, index trackers will fall in line. It is at times like these that active managers may earn their higher fees to outperform their benchmarks. However active managers are not miracle workers, and investors should be mindful that even the experts won’t buck the downward trend if and when it happens.
If you are invested for the longer term then markets typically recover over time. Equity volatility tends to rise when stock prices fall. In uncertain times, it may be a good idea to adopt a defensive posture while staying fully invested in the equities markets. This can be achieved through the Low Volatility strategy, which targets an investment in stocks with low return volatility. This strategy may be particularly suited to those investors who are not required to adhere to any particular benchmarks and who wish to take cover from heightened volatility.