Investors warned of another economic rollercoaster ride

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investors should be prepared for a bumpy ride in 2012, according to a leading Yorkshire stockbroker.

Martin Payne, divisional director of Brewin Dolphin in Leeds, is urging his customers to be rational, focus on long-term goals and stay calm in the face of the continuing economic storm.

In a note, he said: “Market turmoil and volatility have a strong effect on the psyche of investors. Decision–making becomes dominated by emotional responses, rather than reasoned thinking.

“Investors who bailed out of the stock market in September at the height of the eurozone crisis when shares took a tumble missed out on the subsequent bounce, which saw the FTSE-100 climb back up by more than 10 per cent in October.”

This time last year, the top share index had reached a 30-month high with many stock market experts predicting that the blue-chip index would hit 7,000 by the end of 2011.

“These optimists had not counted on the eurozone crisis, which saw investors take flight and share prices around the world nose-dive in the summer,” said Mr Payne.

“The question on investors’ lips is whether there will be money-making opportunities in 2012?

“Well, you will have had to have fallen asleep like Rip Van Winkle not to notice that the global economy is still on a precipice.

“Developed nations are knee-high in debt, while the economic steam train of China is slowing. And with Britain at loggerheads with France and Germany, the eurozone crisis and its ramifications will be felt long after the New Year celebrations have stopped.

“These are nervous times and stock markets need to be underpinned by confidence as much as balance sheets.”

He said that the bank remains the obvious place to store money, but there is little to suggest that the Bank of England’s base rate will rise any time soon.

Even gold, the classic safe haven, has had a rocky ride in 2011, he added.

Mr Payne said that investors should consider moving up the risk ladder to squeeze as much as possible from their savings.

He added that blue-chip shares are the main port of call for seasoned investors.

“They can provide product and geographic diversity and their strong balance sheets also tend to provide protection in tougher economic times,” he said.

“Their global reach makes them less vulnerable to a downturn in any one particular economy.”

Mr Payne added: “Uncertainty has become the watchword in recent months, which is why portfolio diversification in 2012 will be as important as ever.”

bernard.ginns@ypn.co.uk