The Plain Facts: have we really gone through a major market crash?

I'm writing this article after a week of Stock Market turmoil and the riots. I have no idea what the future will bring, I am hoping that it will be quiet. So where are we now? The FTSE 100 currently stands at about 5,320, the Dow Jones stands at about 11, 270 and the Nikkei at about 8,964.
I believe for laymen watching the news, their understanding could be that we've just gone through a major market crash. But what are the plain facts? Just over a year ago the FTSE 100 finished on the 30th June 2010 just above 4,900, the Dow Jones finished on the 26th August 2010 just below 10,000 and the Nikkei finished at just under 8,850.

I can't remember seeing those figures being printed and when I mentioned it to clients they felt it wasn't as bad as they feared. I'm not saying that there are not major financial problems worldwide and that I don't think there will be any more market upsets, but I'm just trying to put a bit of perspective on it. We all have to remember that newspapers need to be sold.

So what do I think people should do during a market downturn? For me one of the most important things is that you understand where their money is invested and what will happen in this situation. I remember in 2008 reports of people saying that they were planning to retire the following year but wouldn’t be able to due to the substantial losses to their pension funds.

The point is, a year before retirement, a person’s pension fund should be in investments which are sheltered from any sharp downward movement in the Stock Market. I believe one of the most important elements of my job is to understand a person's risk profile and recommend a portfolio that matches this. Investments should be spread over different sectors e.g. property, fixed interest and UK equities etc, to help reduce any potential losses.

My advice during a downturn would be to sit tight. To me trying to time the markets is the equivalent to betting on a horse, if you take your money out during the downturn, you could also miss any upturn in the market.

Again last year’s figures are interesting, on the 15th April 2010 the FTSE 100 closed at 5,825, on the 1st July 2010 it closed at 4,805 and on the 18th October it closed at 5,742. Having a full understanding of your investments to me is paramount and why seeking financial advice is important.

We offer a free initial ‘without obligation’ consultation. If you have concerns or want to know where to invest please give me a call on 020 8760 9940 today.