BOOM AND BURST

Financial experts warn a risky AI market bubble is forming. Consumer and money editor KATIE ELLIOTT reveals the steps you should take now to protect savings, pensions and investments

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INVESTMENTS WHILE market volatility can be unnerving, Dan Coatsworth, head of markets at investment platform AJ Bell, says investors should stay calm and avoid knee-jerk reactions.

"It's important not to panic - history tells us that markets go down as well as up, and we regularly see corrections," he says.

"Staying invested has proved to be a wise decision, as the bounce-back can come hard and fast. For example, it only took 190 days for the global stock market to fully recover from the crash when the Covid pandemic brought the world to a halt in 2020." Coatsworth suggests reviewing portfolios to ensure they're properly diversified. "This means having exposure to different assets like shares, bonds, commodities such as gold and property, plus a range of sectors and geographies," he says - adding that long-term investors should stay the course. "Someone with a long horizon should consider a regular investing plan, deploying a set amount each month regardless of what's happening in the world. If markets fall, they will be able to get more for their money." As for cautious investors, he advises: "Reach for the investment equivalent of a hot water bottle and a blanket. Money market funds have surged in popularity this year as investors look for lower-risk investments in ISAs or pensions." Quilter Cheviot's Ben Barringer also emphasises the importance of spreading risk. "Diversification remains the single most important safeguard," he says.

He advises diversifying by sector and region, and ensuring your portfolio is not overly concentrated in the US or technology stocks. "Spreading investments across geographies and industries reduces risk and helps smooth returns over the long term."

WITH AI stocks skyrocketing to dizzying heights, caution bells are ringing across Threadneedle Street and beyond. The Bank of England has already flagged an AI "bubble" that could burst like the dotcom crash - sending shockwaves through the British economy.