KEY POINTS:
It's surprising how often private investors talk of getting out just after a financial market has fallen. Smart investors are looking for bargains. Stock prices will eventually rebound.
Having said that, trying to time any market is a mug's game - not even economists get it right.
Most bear markets, which is what we're in, come about as a result of economic recession. In this case New Zealand has suffered reverberations from the United States sub-prime lending crisis, which has hit US banks' bottom lines hard with large numbers of borrowers defaulting on mortgages.
There is little doubt that there's more volatility to come and we may not have seen the bottom of the cycle. So investors do need to behave differently to what they would do otherwise.
One strategy often pushed when markets are down is dollar-cost averaging. This involves drip-feeding money into shares regularly regardless of what the market is doing.
The advantages of this are that you're limiting investing all your money when the market is high. Secondly, when the market is low you buy more shares for your money and when it is higher you buy fewer.
There are arguments against dollar-cost averaging - a cynical one being it's a salesman's tool to prise away in small increments a sum he couldn't talk you out of in the first place.
Even if you believe in dollar cost averaging, it doesn't mean buying stocks willy nilly. There needs to be some stock picking done.
In a recession, if that's what we're going into, consumers may not want to spend their discretionary money at the likes of Pumpkin Patch or even have discretionary money, says Jeff Matthews, senior financial adviser at Spicers Wealth Management. It's likely, however, that they're still going to be buying beer, electricity and petrol. Other companies cited as good buying in the current market include companies such as Vector and Contact Energy.
"Fletcher Building is also seen as good buying even through domestic spending in the residential market is down." There are plenty of companies that have taken hits on their share prices in recent weeks that still aren't good buying, says Matthews.
"Just because the company was at $4.10 a share and is now $2.50 doesn't mean it's a screaming buy."
He cites MFS Group, Allco Finance Group and Blue Chip Financial Solutions as companies with problems behind their share price drop.
For professionals such as the fund managers investing people's KiwiSaver money, quarterly and annual returns on their investments are all important. But private investors should have their eye on the next decade and long-term growth.
Those investors, says Matthews, might want to look at the Asian markets because, although they were volatile, they had young, growing economies.
Likewise good long-term growth might be found in sectors catering to China's growth such as those in water, energy and pollution control.
Picking sectors long-term could work, said Matthews, citing the success of BT Funds management in picking telecommunication trends - especially in the 1990s.
No doubt there will be property investors out there feeling just a bit smug right now. It was the property market that was apparently showing all the signs of a bubble, but the stock market took the tumble. Property investors should also reassess their strategies in an uncertain market.
A stock market slide can trickle through to the property market if company profits and ultimately employment are affected, says Gareth Kiernan, economist at Infometrics.
In the right conditions, as in 2001-2, a stock market slide can lead to a boost in the property market with investors looking to put money elsewhere, says Kiernan. But the conditions in terms of interest rates, immigration and even property yields are not right for the New Zealand residential property market to continue tracking upwards.
Matthews concludes that with little hope of much growth in New Zealand stocks and the property market heading sideways or south, investors should be looking to cut debt in order to increase their assets.
Personal data security not guaranteed
New Zealand investors with money invested in Australian funds are being asked to send large amounts of personal data across the Tasman with no guarantees of how it will be kept.
The demands from fund management companies have started coming in the wake of the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which came into effect in December.
The letters, such as one from Man Investments, ask investors to provide certified copies of documentation such as driver licences, passports, utility bills, council rates bills, bank or credit card statement or a mortgage statement. In the case of trusts, certified copies of trust deeds and identification documents for one of the trustees are needed.
Nowhere does it say in the letters in which country the data will be stored and if it will be held electronically.
When the Herald called the helpline listed on a letter from Liontamer about the Anti-Money Laundering request, the staff member initially didn't know what would happen to the data, but subsequently said it would be held by Link Market Services in Australia.
But Goldman Sachs JB Were said in response to a question that the data would be held both in hard copy and electronically in Australia.
Two of the companies the Herald spoke to said the data would be held on secure servers.
In the UK there have been blunders where personal data has been lost by government and private companies, putting millions at risk of fraud. At least 7 million families who claim child benefit had their personal data lost. The Ministry of Defence also lost a laptop computer containing personal details of people who had applied to join the security services.
What's more the births, deaths and marriage records of millions of British citizens are at present being turned into digital files by a firm in India.
