When all hell breaks loose...

It’s always puzzled me how professional investors around the world, often overseeing multi-billion-dollar investment portfolios, rush to make snap decisions to either buy or sell investments.

But that’s what they do with monotonous regularity every time there is a sudden and unexpected, and often not so unexpected, outside shock to world markets such as we have witnessed this weekend in the middle east.

 Investment markets the world over and including Australia’s local market will be deeply unsettled by the events in the middle east over the weekend raising the question for investors of how they should respond.

My advice on this never changes.

Firstly, don’t panic. There will be a lot written in the next few weeks about world markets, the likely impact on the price of oil, gold and the US dollar where in truth, some of it will be reasonable but most won’t.

The markets for their part are likely to bounce around as rumors and reality clash and institutional investors try to find the best way forward while maintaining good faith with their investors.

Secondly, trust that you’ve made good investment decisions. I suspect the events of the weekend will create yet another storm to sweep the world’s investment markets, throwing share prices into disarray.

The best response is just to bunker down and wait for this storm, like all storms, to pass. It’s already too late to sell if that’s what you are thinking of doing, and even if you did, there is no way of knowing whether you can buy back at a lesser price than you sold.

Finally, when the dust settles, review your investments. The truth is these storms that sweep through investment markets from time to time typically work to weed out weaker investment options or companies.

Some companies will go out of business, and your investment will be lost. Some will sustain a significant loss of investor confidence, and you will need to decide whether your investment will recover and if not, seriously consider whether to sell.

The best protection though is simply to choose strong investments that will withstand whatever the markets throw at them and needless to say, that you obtain good advice as to what you should and shouldn’t invest in.