Investors react to volatile markets

In the past six months the All Ordinaries has moved from a high of 5070 in April to a low of 3829 in August.

The market fell 24.5% in four months, hitting lows seen after the global financial crisis (GFC) in July 2009 and before December 2004. Investors' capital has not gone anywhere in seven years.

The global economy is facing significant uncertainty at the moment.

The United States, which accounts for 25% of global GDP (growth), is facing a recession and its debt issues are adding to serious concerns. Sovereign debt issues in the euro zone are weighing heavily on its economies, and the region's banks have significant holdings of sovereign debt.

Here in Australia we have a dual economy, where retail and manufacturing are struggling and countering the mining boom, which is heavily dependent on China. Household and business confidence is affected by all these global issues.

What this means is that there is certainly no rush for small investors to get into the market, as there is not going to be a huge bounce.

If they are already in it, then they should be looking at their dividends. The ride will be bumpy, so they shouldn't play if they can't afford to lose.

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