Source: Mercer, ThreeSixty.

You may have considered increasing your investments in cash and short term money-market products given current market conditions however, this course of action may result in you being worse off in the long run than staying with your plan and riding out the volatility. Exiting the market in favour of cash now will entail selling out of the market at its lowest point in over two years and investing in cash when it is at its highest rate in 12 years and potentially at the start of a downward trend.

We have no way of knowing when the turmoil in world financial markets will come to an end, just as it is impossible to identify when such crises are likely to start. We do know that crises of varying magnitudes and durations happen regularly, and that every crisis (financial or otherwise), every recession and every bear market comes to an end. When that happens, sharemarkets not only recover lost ground, but inevitably move higher.

Your best defence against the unknowable is to diversify your investments as widely as possible, take enough risk in your portfolios to enable you to meet your return objectives and as far as possible, fully understand the risks attached to every investment you make.

In order to generate adequate returns, risk is not something that can be avoided but rather something that needs to be managed.

Prepared by Angela Jenkins - a CERTIFIED FINANCIAL PLANNER™. Angela and Aequis Pty Ltd are Authorised Representatives of GWM Adviser Services Limited Australian Financial Services Licensee Registered Office at 105 - 153 Miller Street North Sydney NSW 2060. GWM Adviser Services Limited is a Principal member of the Financial Planning Association.

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.