How badly have you been hit?

It really is very depressing when you pick up your Gulf News and read about a whole series of good economic data being released from most of the industrialised countries around the world, and then look over at the stock market indices to find that they have fallen further.

Many people have asked me for advice as to what they should do in these circumstances.

My advice is always the same: "Do not look at the indices'.

This is a great time for acting like an ostrich. Bury your head in the sand for a while until all the fuss has died down with regard to the various accounting problems that are coming to light and the world and the markets get back to some kind of normality.

The rich shall become poor…If you really must look and want to cheer yourself up, I read an article the other day that said that the Rich had lost about $2.6 trillion in 2001 alone. So there are people out there who have "lost" a great deal more than you.

I put "lost" in inverted commas, as I believe it will be "found" again once reason returns to investors.

When that will be I cannot tell you, but I do know a number of people who think as I do and are willing to take the risk of making a great deal more money by investing in the markets now.

Of course, they are not looking for a short term gain and they are prepared to look at losses for a while longer, but over the medium to long term I am sure that they will make money.

The unfortunate about to retire…The really unfortunate people are those who require funds now for whatever purpose, but especially retirement.

They are faced with having to use a sum of money that is probably 40 per cent or more less than they envisaged two or three years ago, to obtain an income for the rest of their lives.

The funds that they do have will have to be invested in a long-term fund like an annuity, or even a bank deposit, which will pay them an "income" of around 60 per cent less than they could have expected a few years ago when the fall in interest rates is also taken into account.

Pensions are underfunded…A recent report commissioned by the UK government has suggested that the average individual saves about £3,000 per annum less than he or she should do for retirement purposes.

How this figure has been arrived at, I have no idea, but certainly I have never had anyone tell me that they have saved too much for their retirement. Despite this report, people in the UK save more for this purpose than the rest of continental Europe put together, so those of you from other parts of Europe take heed.

There is a suggestion that the French social security fund will run out of money by 2007 and, thus, drastic tax rises will be needed to rectify the situation.

As politically this is unlikely, anyone of French nationality had better start saving hard. In fact, there needs to be some unity among European nations on this front to forge a common policy on pensions, which, if other issues are anything to go by, may take some time!

In summary…In brief, what I am saying is if you are badly affected by the market fall, sit tight and do not be tempted to sell unless you urgently need the money. For the brave amongst you, look at the current situation as a buying opportunity.

But in any case think long and hard about your retirement and put money away now, even if it is only in a bank account, to take advantage of the market when it shows signs of recovery.


The author is the Head of Reti-rement and Relocation, Towry Law International, Dubai.