How stocks and shares are affected and what can you do

Who is affected by the recent collapse in stock markets worldwide?

Anybody who has money invested directly in Irish or overseas equities, who is putting money into a pension, or has an equity-linked mortgage or savings plan.

Those invested in a balanced portfolio including cash, bonds and property as well as equities are better protected than those whose entire holding is in shares.

How badly affected are those who in- vested directly in the stock market?

It all depends on when the shares were bought. Those who have owned shares for a number of years have seen this year's gains eroded, but are still sitting on the sizeable profits clocked up in the rally that has been underway since 1995.

But investors who bought toward the end of last year or earlier this year are facing losses, particularly when the costs of investing are taken into account.

An investor who bought £5,000 worth of CRH stock at the beginning of March, when the stock market was nearing record highs and CRH was trading at 970p, would be nursing a paper loss of more than £1,030 or 21 per cent of the investment, based on yesterday's closing price of 770p.

Meanwhile, an investor in Bank of Ireland would have incurred a paper loss of of £1,335 or 27 per cent on a £5000 investment. Bank of Ireland was trading at £14.05 six months ago but closed at £10.30 yesterday.

Should investors attempt to cut their losses and sell?

The general advice from stockbrokers, fund managers and personal finance advisers is that the middle of a crash is the worst time to sell. Anyone who does not need their funds is advised to sit tight for the moment and see how things pan out.

"There are going to be periods when markets go down but bear markets tend to be sharp and occur quite quickly. You just have to ride them out," says one stockbroker.

What course of action is open to investors who need their money in the short-term?

Those who need immediate access to their money - to fund house purchases or pay children's tuition fees, for example - face an unenviable situation where the value of their equity holdings has dropped sharply over the last week.

Depending on the circumstances, brokers suggest it may be worth investigating whether it might be better to take out a short-term loan given the low cost of borrowing at the moment.

How will the stock market crash affect those approaching retirement?

Those who are due to retire this year should be protected from the collapse in share prices, as the bulk of their funds should already have been moved out of equities and into safer financial instruments such as bonds or cash.

"The norm is to move funds into a more secure environment as retirement approaches. In the last four or five years there should have been a steady move out of equities. Today most if not all of the fund should be locked in bonds with steady yields and should be fairly well immunised," says Mr Des Crowther, director of the Irish Association of Pension Funds (IAPF).

Those whose retirement is more than five year's away have time to see their funds' performance recover from the recent downturn. As one broker noted, shares prices have long since recovered from the 1987 Crash.

Is it a good time to buy shares?

Many institutional investors see value in the market at current levels. For private investors, much depends on how much cash they have to invest and how much risk they are prepared to assume, but there is no doubt that when the dust settles, the market will be offering much better value than three months ago.