"We take a long-term view that investors should ride it out," says David Harbage, fund manager at Barclays Stockbrokers. He suggests that anyone who sells their shares and goes into cash, in the hope of avoiding any bigger falls, may be making a big mistake. "We won't be following a short- term path for more speculative profits because you can get caught out. You are as likely to get things wrong as right, bearing in mind the costs involved."
Mark Dampier, investment director of Bristol-based Churchill Investments, points out that the FT-SE 100 has already dropped 14 per cent from its highest point. He says that the last time his clients expressed concern was in 1994, when the market dropped from 3,500 to a low point below 3,000. "My advice then was to stay invested and it's the same now. Unless you believe the market will drop another 25 per cent, you should hold on."
Most private investors hold their shares through collective funds - unit and investment trusts. The fund managers pool investors' cash and use it to buy shares they believe will perform well. This approach gives some protection against a falling market because the fund manager has the discretion to sell up a few of the shares (usually no more than 10 per cent of the fund) and lock in some cash value. Shares can be bought back when the manager judges that markets are about to rise again.
If you have a tracker fund, which only mirrors the performance of a particular stock market index - usually the FT-SE All Share - you will take the full hit of any falls because the fund cannot sell any shares for cash.
There is a silly season factor built into this summer's bouncing markets. Richard Hunter, head of dealing services at NatWest, says that much of the City is on holiday: "When there is less trading, the market is more volatile. Within a month, we will have a clearer picture of what is going on." That may turn out to be a bear market. But if you are holding your shares as 10-year investments, you should be prepared to sit it out.