Monday's Iseq index of Irish shares plunge serves as an example of the extreme volatility we are seeing in global stock markets, writes Claire Shoesmith

Just when we thought the worst was over, the Iseq index of Irish shares took yet another plunge on Monday and wiped a further €1.7 billion off its value, ending the day at its lowest closing level in almost a year. While it clawed back €1.5 billion the following day, this rapid change of sentiment serves as a perfect example of the extreme volatility we are seeing at the moment in global stock markets.

As of the beginning of this week, the index was down almost 20 per cent from the 10,000 peak it hit in February - a figure that translates as €19 billion having been wiped off the value of Irish listed stock since January - a loss that will have left many investors reeling.

While it is never pleasant to see your net worth sliding downwards, it doesn't mean that now is the time to sell. In fact, the obvious knee-jerk reaction of selling because you have made a loss only ensures you won't be around to benefit from the rebound when it comes, says Fiona Daly, managing director of Rubicon Investment Consulting.

"Moving out of equities into cash just because there has been some volatility in the market isn't the answer," she says.

Many others agree. Stuart Draper, head of equities at Dolmen Securities, believes that the recent stock market declines have created the best buying opportunity in more than five years in the British and Irish markets and has no hesitation in recommending at least five Irish equities that he believes represent excellent value at their current levels.

"Within three months we are going to see a significant uplift in valuations from the current levels and, within that timeframe, some of these economic worries will have disappeared," he says.

Robbie Kelleher, head of research at Davy, agrees, saying there is definitely value to be had in the Irish market now, though he is less upbeat about the fundamentals of the Irish economy.

"There is a buying opportunity, but there is a certain amount of bravery involved," he says, adding that there are some fairly stiff headwinds circling the market at the moment, including the expectations of some weak economic news coming down the track.

However, it is also worth remembering that we are coming off a fairly high platform as far as economic growth and equity price increases are concerned, with gross domestic product growing by 6 per cent last year and Irish equities significantly outperforming their European counterparts for several years now - the Iseq increased 28 per cent over the course of last year.

This is unlikely to happen this year, however. Currently the Irish market seems to underperform on the upside and outperform on the downside though Draper is adamant that, within 12 months, the Iseq index of Irish shares can find its feet and again outperform its peers.

Despite the upbeat analysis of the Irish market, it is important to note that investing in individual stocks is not without its pitfalls. After all, as one Dublin trader says, investing in any Irish stock is akin to investing in a single Irish financial stock. That's because the four main banks, AIB, Bank of Ireland, Anglo and Irish Life & Permanent, together account for almost 44 per cent of the Iseq's total tradable capital.

Add to that the index's largest company, building materials group CRH, and more than 60 per cent of the tradable capital is accounted for. As a result any significant moves in the banking or construction sectors, which are both highly sensitive to the property sector, cannot help but have an impact on the other components of the index.

The solution here is either to invest in funds or, if you prefer to invest in individual stocks, to pick a variety of companies from around the world.

"Since we joined the euro, the currency risks associated with investing in stocks outside of Ireland is no longer what it was," says Daly, adding that it can even be more beneficial to swallow the risks associated with investing in dollar-denominated stocks and reap the benefits of full diversity.

However, in the recent global turbulence with significant declines in all markets in Asia, the US and Europe, the location and activities of your particular investment has proved almost irrelevant and the Irish banks are a perfect example of this.

In a trading update last week Anglo Irish Bank raised its profit target for the full year, citing strong loan growth; yet the bank's shares fell 2.5 per cent that day, begging the question: what does a company have to do to gain support?

There is no obvious answer, or as one Dublin trader said this week: "That's all very interesting, but have you not heard the world is going to end?" - meaning that with global sentiment as it is and economists and investors constantly looking to the US for a lead, an Irish company can put in the best performance of its life, but it might as well not have bothered if the macro picture isn't looking perfect.

Still, while the recent volatility is enough to instil fear into the most seasoned of investors, let alone the small-time retail punter, if you are going to take the advice of the experts and see the current turbulence as an opportunity and not a deterrent, then the sooner you get your money into the market the better.

For those unsure about what they are doing, the best place to start may be to invest in an equity fund.

Although the costs will generally be higher than investing in individual shares, it is an easy way to access a diversified basket of stocks.

Such investments can be made through brokers, life assurance companies or in some cases banks - Rabodirect has a wide range of funds available on its website - and they come in all shapes and sizes to cater for all different levels of risk.

It is also possible to trade in funds online through both brokers and banks and this can often save you substantial amounts of money as the fees associated with online trading are lower than for trades organised over the telephone.

In general, investors can expect to part with about 1.5 per cent of the value of the fund in management fees each year, though an upfront fee of about 3 per cent may also be charged as well as additional costs for exiting and switching funds.

Alternatively, investors who would like advice and guidance in building a share portfolio can use the services of an advisory or a discretionary stockbroker. While an advisory broker will, as his name says, advise you on your purchases, a discretionary broker has the authority to buy and sell shares on your behalf without prior approval.

Another possibility to consider is Exchange Traded Funds (ETFs). These provide exposure to a diversified portfolio of shares through one single transaction and, as in the case of the Iseq 20 ETF, offer a simple, low-cost entry to the Irish Stock Exchange.

For those wishing to play a more proactive role in their investment portfolio, it is also possible to trade individual stocks online.

While Ireland continues to lag behind the United States and Britain significantly when it comes to online trading, things are starting to pick up and the availability of online trading platforms from the likes of National Irish Bank are making it more accessible.

It is worth noting that, even when using a broker, it can be significantly cheaper to trade online rather than via the telephone.

According to a survey produced last year by the financial regulator, the commission charged by brokers can range from as little as €32 with international broker Fexco, to a minimum of €100 with Davy and Goodbody.

Stockbrokers will also charge you annual maintenance fees on your account, which in some cases can be as much as €200.

It is worth noting that some brokers also charge for share certificates, transfers and statements.

Another possibility is to join an investment network, of which there are a growing number popping up around the State.

Rory Gillen, one of the founders of Merrion Capital, has set up Invest Like The Best, a scheme aimed at teaching novice investors how to make the most of their money and also to provide support once they start investing. Another group called The Investment Club Network (TICN) also offers training and support through local clubs.

Further information about both of these can be found at www.investlikethebest.ie and www.ticn.ie