INVESTORS have taken a “flight to safety” amid turbulent stock markets, but attempting to move in and out of equities can prove costly. Here we answer your key investment questions:

How much of my portfolio should I have in equities and how much in safe haven assets, such as gilts?

Asset allocation – how your portfolio is split – is said to account for 90% of performance. The spread of investments largely depends on goals, time horizon and attitude to risk.

A “moderate” investor looking to achieve growth over 10 years or more could have 10% in cash, 15% in property, 20% in fixed interest – gilts and bonds – and 55% in equities. Someone in their 20s or 30s saving for their retirement in 30 or 40 years’ time could have almost all their portfolio in the stock market.

Is it better to drip feed money into the markets or pay in a lump sum?

Investing regularly in the market – say £100 a month – helps to spread risk because you are buying in at different levels. This means that when prices are high your monthly contribution will buy fewer shares or fund units, but when they are low your get more.

In a bear market, this “pound cost averaging” can be particuarly useful as it allows you to build up an investment poised to benefit from a recovery without having to try to time the bottom of the market. Although it means you will lose less if markets fall, it also means you will make less than lump sum investing if markets rally suddenly.

Should I be rebalancing my current portfolio?

Markets rise and fall, and a balanced portfolio will have assets that are “uncorrelated”. This means that they tend to move in opposite directions. So, when the stock market is tumbling, as it is now, bonds usually perform better and vice versa. Rebalancing your portfolio so that your asset allocation remains the same will ensure that your investments match the risk you are prepared to take.

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