General advice on market volatility

Despite the recent financial scares and various governments responding to prop up the financial system, an investment psychology expert is urging consumers not to panic.

Dr Malcolm Johnson, a financial planner from Griffith University’s Business School, said the worst thing consumers could do at the moment was panic.

“People who invested beyond their personal tolerance to risk are going to be more disturbed with prevailing news,” Dr Johnson said.

“These people in particular, will be experiencing state of despondency and feeling remorse, as if the sky is falling in.”

Dr Johnson said the current retraction in the market was part of the normal cycle.

“For the last three to four years most people have done quite well out of the growth in the market. Usually in choppy times like these, people panic and that’s the worse thing people can do.”

He recommended focusing on longer term objectives and seeking advice to make informed decisions.

“It’s this type of environment where wealth transfers from the impatient to the patient. People should act quickly to get quality advice, but allow time for consideration before making a decision.”