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Is this the end of the Investment World as we know it?

The recent market volatility is unsettling. However, history shows that in the long term markets do recover; the big question is - how long will it take? No one likes to see their investments go down, but periodically that is what happens. The reduction in values is only relevant if you need to raise cash from your investments now . Ups and downs are a necessary part of market behaviour.

It is also important to remember that historically falls in prices have provided very good buying opportunities for the longer term investor. It is extremely difficult to time the bottom of a market cycle, particularly because when recovery happens it quite often does so very quickly. The last time markets hit the bottom was on 12th March 2003, and within that month the FTSE All Share Index then rose by about 11%.

Figures from Fidelity Investments highlight the fact that the longer term investor should not panic when markets fall. They show that, using the FTSE All Share Index as a measure, an investment of £1,000 invested in the UK stockmarket in February 1993 would have been worth about £3,500 in February 2008 (including the reinvestment of dividends), if left untouched. If the same investor had missed the best 40 days in the market that investment would now be worth slightly less than £1,000.

What is even more interesting is that 5 of the best 40 days in the last 15 years occurred in the first 3 months of 2008.

This indicates that time invested is likely to be more important than timing (as well as quality of investment managers, of course).

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