Keep calm and stick to your investment plan.

That was the advice from two leading Bermuda investment professionals yesterday, as more wild swings on Wall Street ended in a sixth successive down day.

Robert Pires, chief executive officer of BIAS, and Nathan Kowalski, chief financial officer of Anchor Investment Management Ltd, advised investors to stick to their plan amid the topsy-turvy trading on global markets.

After some early respite from the selling, as the 30-stock Dow Jones Industrial Average shot up by 440 points, the market capitulated in the final hour, leaving the Down 204.91 points down.

The broader S&P 500 Index initially surged 2.9 per cent higher, but closed 1.4 per cent lower amid the volatility, and has shed 11 per cent of its value in the past five days.

“Although scary, we have been through numerous meltdowns and know that in the long term these things play out in your favour,” Mr Pires said.

“The operative words are long term and unless an investor is committed for at least 18 months, but preferably three to five years, they should just stay out of stocks.”

Mr Kowalski offered some similar thoughts. “Unless you’re planning on needing all of your money in the next year or two, it’s no reason to panic. In fact money you need within five years should likely not be invested in risky assets.

“And if your investment time horizon is in excess of ten years, the odds of losing money in a diversified portfolio are extremely low. Maintaining your composure and making rational investment decisions is always paramount.”

Mr Pires said the slide in share prices was partly the reaction to a meltdown in the Chinese stock market that the authorities had been unable to calm. The Chinese central bank yesterday loosened reserve requirements for lending which helped to fuel yesterday morning’s rally.

“An additional factor has been the prospect of a US Federal Reserve interest rate hike next month. With markets unsettled this is unlikely to happen until December at the earliest and possibly as late as March.”

Mr Pires said BIAS saw some buying opportunities amid the market mayhem.

“We have used this sell-off as an opportunity to fully position ourselves in growth stocks in which we have the strongest conviction, as well as increase our holding of high dividend-paying REITS [real estate investment trusts] which have recently been overlooked and as a result are yielding between 6 and 10 per cent.

“Our dividend income fund strategy, for which we received two awards, is most useful in times of market turmoil as the consistency of dividends creates a cushion during sell-offs. This does not mean that prices don’t fall but they fall less than the overall market.

“We monitor the performance of all our strategies on a daily basis and are delighted to report that this strategy has so far outperformed the market.”

Some are suggesting that a period of extended declines may be due after the six-year bull market in stocks.

“We don’t know the answer to this question, the truth is no one does,” Mr Kowalski said. “We do know that making investment decisions based upon short-term news is not a winning strategy. In times like this it’s important to remember your investments are designed to carry you through decades not days or weeks. It’s important to stay focused on the long term.”

The markets and the media tended to attribute declines to specific issues, he added. The Greek debt crisis, the Ebola outbreak and the “taper tantrum” were examples in recent years.

“The important takeaway is that markets frequently deal with uncertainty and re-price lower in the short-term as they digest new information, but ultimately, in the long-term, market and economic fundamentals take over,” Mr Kowalski said.

“This happens because the world economy grows over time due to technological, financial and human capital coming together to grow profits or make a new series of profits. Investing relies on this single optimistic premise and over the market history diversified portfolios have been rewarded for believing this.”

The steep declines of 2008 and early 2009 were “emotional scars we all bear”, he added, but he added that such dramatic downturns were rare.

“It took the S&P 500 four years to regain the losses during the financial crisis but the index is now 22 per cent above the 2007 high, even after the recent sell-off,” Mr Kowalski said.

“After an extended bull run, many investors have become complacent and have forgotten that it is normal for stock markets to periodically see intra-year declines in the 5 to 10 per cent range. According to Evensky & Katz, 5 per cent declines happen, on average, four times per year with an average recovery period of two to three months. Ten per cent corrections happen on average about once per year with an average recovery period of eight months.”

Studies had shown how poor the average investor was at making smart long-term decisions, tending to buy high and sell low — at times when stocks were effectively “on sale”.

“It’s important to remember that any investment advice is completely worthless when it’s not used within the context of an actual plan or well defined process,” Mr Kowalski added.

“Trying to create a plan on the fly when markets are in freefall by mashing together a bunch of different tactics and sources of advice is a great way to make things even worse. To be honest, most investors don’t need advice in times like this — they need a psychologist.”