RIDING THE
INVESTMENT MARKET RAPIDS



The first quarter of 2008 was one that many investors would prefer to forget. The US stock market fell by 10% and the UK stock market dropped by 11%.' Even UK house prices drifted 1.7% lower over the quarter.2

It has been hard to avoid the gloom in the media, which relishes horror headlines about crashes. In such a difficult environment, it is all too easy to forget a few basic facts about investment:

• Markets go up and down. There is no investment market where values constantly rise. 

• When markets change direction, the move can be quite sudden and sharp.

• Investment needs a long term perspective. The UK market may have ended the first guarter of 2008 down, but to 31 March, it was still ahead almost 66% over the last five years.3

• If you are a typical investor, you probably feel the pain of a loss - even if it is only a paper loss - at least twice as strongly as the joy of an eguivalent gain.

The rational approach now is to remain invested and not rush to the exits. There is a good case to be made for drip-feeding cash into the markets now by making regular monthly investments. This means that you can take advantage of 'pound cost averaging' - you can buy more shares/units when the price is low than when it is high. That way a turbulent guarter may not seem quite so bad.

1. FTSE All Share and S&P 500 indices measured on 31/12/2007 and 21/3/2008.
2. Nationwide House Price Index to March 2008, www.nationwide.co.uk
3. FTSE All Share index measured on 31/3/2003.