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Bear market may produce positive results for investors

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30/01/2008

Stock market rallies that are a feature of bear markets could help rebalance investors’ portfolios, according to Colin McLean, managing director of SVM Asset Management.

Even though further stock market volatility may lie ahead, McClean has pointed towards sharp rallies as a positive side effect of bear markets, with shares in the biggest FTSE 100 companies looking the most likely to rally strongly. “There are usually opportunities to rebalance in all types of market. Investors do need to be clear about their own objectives and their tolerance for risk, however,” he said.

Furthermore, the long term-prospects for investors remain ‘reassuring’, mainly due to the persistence and breadth of economic growth, according to McClean, who warns investors looking to sell small company shares to err on the side of caution.

“When sentiment is so overwhelmingly negative, any disappointing news from small companies can be punished with sharp share price falls. It can also be harder to deal in these companies, and investors should recognise that selling anything other than very small holdings could take some time,” he added. 

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