It is not often that we experience the level of market volatility that we have encountered over the last few trading days. It is important to know what is going on and why the markets are reacting in this fashion before making any irrational decisions. So without getting too complicated what has caused all of this chaos:

1. The FED have begun to #Taper which was to be expected and still by no means over. They are now injecting $65 billion a month into the US economy as opposed to $85 billion.
2. The reduction in QE has sent emerging markets into turmoil as the fear of cheap money disappearing is becoming a reality.
3. Deflation in the Eurozone has again become a major concern, and we will wait to see if Draghi takes the necessary steps and cuts ECB interest rates tomorrow at his press conference.
4. China and Japan continue to plague news headlines and the Chinese banking system looks to be in a bad state of affairs.

So if we compile all of the above with an inflated equity bubble we are left with extreme volatility and aggressive market swings. There have been analysts calling for a market correction for the last 6 months and if you were to have followed their guidance you would have lost out of a lot of money. Of course don’t be surprised to see them re-appear on the newspapers saying how they have ‘Nailed the correction’ and how it’s time to get out of equities. It is amazing how quiet they can make themselves when the market is going the opposite direction. So how does one navigate through the storms?

What I think is fundamentally important for individual investors is to ensure that you manage your portfolio based on your individual time horizon. If you are a speculative investor and you are in to make a quick buck here and there well then it is probably a good time to lock in the gains you have made over the past 6 months. However if you are a longer term investor well than there is no need for as much concern, you should be happy to sit back and except that there will be some speed bumps along the way but over the long term equities historically provide the best returns.

So my piece of advice to individuals reading all the headlines and trying to make sense of these volatile conditions, is to first establish what type of investor you are and what time horizon you are working with.  From hear you have a solid structure and a blue print as to what headlines you should read and what headlines you should ignore.