Edmond Warner is chief executive of Old Mutual Securities. Previously he was Head of Pan European Equities for BT Alex Brown and Head of Global Research for Dresdner Kleinwort Benson. He has ranked highly in all the leading surveys of investment managers.
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Flick the switch.
You'll never make rational investment decisions if you're mesmerised by the gyrating prices on your screen. Steel yourself not to look at prices, read market reports or talk to stockbrokers during trading hours. Markets are not going to turn for the better just because you will them to. And, as prices have fallen so far, it matters little if you miss the first inch of their eventual recovery.
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Pound the streets .
You don't just need a sense of perspective; you need the widest possible perspective. The best investment opportunities are those you discover by observation of the workings of the economy in the aftermath of the stock market collapse. If you can bear it, take the taxi driver litmus test.
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Read a good book.
History never repeats itself exactly, but you owe it to yourself to be acquainted with the bear markets of yesteryear. At least if history does then repeat itself you can't say that you weren't warned . I'd recommend JK Galbraith's The Great Crash , a brief but insightful analysis of 1929 and all that went before and aft.
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Avoid collateral damage.
In 1987 the real economy emerged from the crash virtually unscathed. This time the world may not be so lucky. It will take time for share price damage to have its full effect elsewhere. Use this opportunity to pull out of that house move, sell your granny's Gauguin and ask your boss for an extended contract.
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Dust off the abacus.
Down and dirty financial analysis has been out of vogue for a couple of years . As share prices fall, so value emerges. But you'll only spot it if you are looking for it. And this means poring over the numbers , not chasing dreams. You can afford to keep it simple. Thoroughness will pay greater dividends than sloppy sophistication.
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Beware false prophets.
Nobody knows where markets are going - not me, not you, not Abby Cohen at Goldman Sachs or the anonymous authors of Lex in the Financial Times. Your view has as much or as little validity as anyone else's. Keep this in mind and, when your analysis tells you it's time to buy, you'll find you have the requisite bravery.
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Don't shoot the analysts.
The backlash against investment bank analysts is in full swing. Don't be diverted by the spectacle, however enjoyable it might appear. Use the research available dispassionately. As in all human life, you'll find there's good and bad there. Just be sure, once you've digested, to formulate your own conclusions.
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Rebase to zero.
Ignore charts of historic share price performance. How a company was valued at its peak is no guide to its value today. Those shares that have fallen furthest may yet have furthest to fall. Start with a blank sheet of paper - no prejudices or preconceptions - and build an investment argument that reflects today's reality as you perceive it.
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Yield to temptation .
Equities are but one tidbit on the investment smorgasbord. One way of comparing them with other asset classes is through their dividend yield. Seek out shares whose yields are approaching those on government bonds . Although unfashionable, this could prove the way back into the market with the least risk. Just be sure those dividends can be met out of the companies' profits.
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Look for leverage.
Courage mon brave! When you decide the time has come to invest, be sure to do so with conviction . Use leverage to your advantage - be prepared to borrow ; consider the use of derivative instruments. You could be a hero of the next bull market, if only in your granny's eyes.
