With the stock market lurching about violently, the temptation is to steer well clear until a brighter investment day. However, history shows this is the wrong thing to do.
Mainly, this is because inflation is always eroding your cash pile. But predicting share price moves is difficult, so many of us entrust our money to a fund manager. Yet only a few of these are effective in the bad as well as the good times. Who are they and what can we learn from them?
Neil Woodford is a manager that many of us recognise as having a safe pair of hands. He runs the £20bn Invesco Perpetual Income and High Income funds and has generated returns of more than 100 per cent during the past 10 years.
Right now, he owns lots of GlaxoSmithKline, oodles of AstraZeneca and a packet of British American Tobacco. However, his success goes beyond picking a bunch of shares paying high dividends and sticking them in a portfolio. He also pays close attention to wider events, which sometimes means swimming against the tide. For instance, he has long suggested that the banks needed more capital – the euro crisis has surely proved him right.
Another contrarian is Anthony Bolton, who manages Fidelity's high-profile China fund. Much of his success has been in turnaround situations, such as the retailer Next in the 1990s. A key part his approach is to meet with a company's management and be satisfied that they know what they're doing. You can't do that, but private investors have access to annual reports and company announcements; you can also attend annual general meetings.
It is prudent to drip-feed money into an investment gradually rather than investing a lump sum all at once – it smooths out the peaks and troughs. But, whatever you do, don't stop investing.
David Kuo is director of the financial advice site fool.co.ukReuse content