Shares storm

contains a completely different set of shares from those in the FTSE 100, or a mix of shares and other assets like property or gold or cash, then the fall in your fund may bear no relation to the fall in the main index at all.

Most investors invest in funds that have a certain percentage in equities, the rest in other assets, so perhaps only the portion in equities will fall as the market falls.

The starting point in understanding how your investments will rise or fall with the market is to have a look at what’s actually in the funds that you hold and how “risky” they are. Very roughly, and on a scale of one to five, where one is low risk and five is high risk, if all of your investments are in cash then they will be a one, and won’t rise or fall at all in line with the market.

If all of your investments are in one share they will be high risk and a five. Most funds will be somewhere in-between.

So you need to make sure that you have funds that suit the level of risk that you are prepared to take with your money.

If you’re only 30 and won’t need to access your money until you’re 60 then you might be up at a four or five, if you want it next week then you should be down and one in cash and you shouldn’t be invested in the stock market at all.

In terms of whether to cash in your investments now, when the market has fallen substantially, it’s rarely a good idea.

All you will be doing will be crystallising a loss and once you’re out of the market then you will have no chance of getting your money back as the market rises over the coming weeks, months and years. And it will rise, we just don’t know when or by how much.

If you don’t need the money now then be patient and ride out the storm.