FTSE continues to misbehave – August’s rollercoaster

23 August 2011 / by Oliver Roylance-Smith

With the FSTE 100 continuing to misbehave, the persistent market turmoil provides a real headache for investors. We take a look at the rollercoaster ride that has been August and what options to consider in these volatile times.

Week One – global meltdown

During the first week of the month the FTSE plunged below the 5,300 mark due to concerns over the eurozone debt crisis and the strength of the global economic recovery. The week ended with the worst weekly performance since just after the collapse of Lehman Brothers in 2008.

Week Two – trouble ahead

The following week saw the FTSE fall below the 5,000 mark as volatility continued on the back of the US downgrade by credit rating agency Standard & Poor’s bringing an end to the country’s 70-year AAA rating. This was the first time it has breached this barrier since early July 2010.

Week Three – record breaker

Last week included a daily loss of 4.5%, the biggest single day fall since November 2008 amid increased fears about a double-dip recession. Combined with UK growth forecasts being downgraded and the FTSE closed at 5,040.76, a fall of over 5% for the week.

Investors take note

Although yesterday’s closing value was up 54.5 points or 1.1% on the previous day, this is still nearly 1,000 points or 16% lower than last month’s high.

Direct exposure to this market volatility via individual shares or investment funds will have provided investors with sharp losses. The size and speed of these losses should be a lesson to us all and gives us an opportunity to revisit how we gain exposure to this important investment benchmark.

Capital protection

The added feature of capital protection is something which does not exist in the world of individual shares and is very uncommon among funds. There are a number of plans which combine the safety net of such a feature with the potential to provide returns over and above cash savings. So whether you are looking for growth or an income solution, these products offer an attractive alternative.

Compare capital protected plans »

Defined returns and defined risk

Higher returns are potentially available via structured investments. Although these plans put your capital at risk, they offer a defined return for the level of risk taken. This clarity in terms of risk v reward is an attractive feature and there is a very wide choice available. Examples include the potential to receive 10.5% per annum, growth based on 7.5 x the rise of the FTSE and income linked to 1.5 x inflation.

So whether it is capital growth or an income seeking investment, these should definitely be considered in the current economic climate.

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No news, feature article or comment should be seen as a personal recommendation to invest. If you are in any doubt as to the suitability of a particular investment please get in touch with us for advice.

The value of investments and income from them can fall as well as rise, and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.

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