KEY POINTS:
The sharemarket is all over the place, property is tanking and the banks are also feeling the pressure.
It's enough to make investors want to cash up and hide it all under the mattress.
But that's exactly what the experts are cautioning against.
ABN Amro head of research Mark Lister says it's easy to feel panicked in light of all the media coverage of the US financial collapses.
"A lot of people probably feel like they have nowhere to turn." But Lister says there are plenty of options for those looking to survive the credit crisis.
Firstly those who are worried about their money in the bank, shouldn't be, says Lister.
"The banks here are much better capitalised than in the US."
It's a sentiment which Chris Caton, chief economist of BT Financial Group, echoes.
"All the signs are that the banks are doing okay. They are far better regulated than their US counterparts. We don't have direct exposure to sub-prime and we don't have the fore-closure problem of the US - people can't just walk away from their homes."
While it's true they are exposed to the global costs of funding Caton says any resulting increase in mortgage defaults is unlikely to bring down the banks.
"I would be surprised if any Australian bank is undone by this."
But that's not to say investors should cash up all their assets and keep their money in the bank.
"There are still inflation concerns," says Lister.
The value of cash, despite earning interest, is eaten away over time while shares and property are seen to hold up well in the face of inflation.
Interest rates at the bank have also begun to fall off recently in light of the official cash rate cuts made by the Reserve Bank and further cuts are expected by many analysts next month.
"It's been very tempting to just sit in cash for the last six months but the risk is if the economy runs into trouble and the OCR gets cut in half, people will see their returns cut dramatically," Lister says. Moving into term deposits and bonds can help lock in the higher interest rates.
And while the sharemarkets are still highly volatile they are at a low which means it could be a good time to start investing again.
"When there is so much fear and volatility it can be a good time to buck the trend."
Lister says history shows markets pre-empt the real economy and will recover before the real economy does. "By the time it becomes clear we are coming out of a recession it's almost too late."
Caton says investors have suffered a great deal of damage in the sharemarkets but he believes all or most of the worst is now behind us.
"History does suggest the sharemarket will recover quite quickly. I'm not anticipating it any day soon. But when it does, it's likely to recover by 25 per cent in the first 12 months.
"The biggest mistake is to say it's all too hard, I'll go to cash or fixed deposits. And miss out on the payback."
Lister says investors going back into the sharemarket should be aware that there could be another six months of high volatility and it may take three years for share prices to come back up.
"But anyone willing to take a three- to five-year view should be stood in good stead. These are the times when those sort of astute investors make their money."
