In periods of volatility, it is natural for investors to be concerned about the value of their investments. However it is important to remember that equity investing is for the long term. There are good reasons why equities should yield more than many other assets or investments.
Over the past 25 years, equity markets have weathered fluctuating conditions to deliver strong returns.Equities do carry a higher level of risk than bonds and cash, and investors can expect greater levels of volatility. But as a part of a well diversified portfolio, they have historically proved the best way to grow capital.
Investing in equities is the best way to protect wealth, according to the latest 'Equity-Gilt Study' from Barclays de Zoete Wedd. The study also concludes that all investors should, where possible, reinvest income. However, there are also times when it is more profitable in the short term to sell equities than to hold them.
There is no credit crunch for large companies. Triple-A-rated companies can borrow at lower rates than they could a year ago. Both US and non-US public companies will continue to borrow money to buy their own shares, or to take over weaker competitors, thus enhancing global asset and stock prices. Though there is indeed less credit available for speculators, there is no ‘credit crisis’ in the strict sense of the word. But arms are open for companies with sensible business propositions and sound investment plans.