Quick thinking is the only strategy ina volatile market

Twice recently I have come across respected commentators on the investment scene pronouncing the death of "Buy and Hold" strategies. Such a viewpoint should bring a smile to my face as a stockbroker. Yet I confess to being a little un-nerved. Overall, I have to agree that private investors should no longer rely on buying good companies, locking them away and forgetting about them. Markets are now much more volatile. These days you have to be nimble not to be caught out.

Twice recently I have come across respected commentators on the investment scene pronouncing the death of "Buy and Hold" strategies. Such a viewpoint should bring a smile to my face as a stockbroker. Yet I confess to being a little un-nerved. Overall, I have to agree that private investors should no longer rely on buying good companies, locking them away and forgetting about them. Markets are now much more volatile. These days you have to be nimble not to be caught out.

Of course, it is the professional investor that is setting the pace. Private investors may conduct the majority of trades on the stock exchange, but ownership is heavily with the investing institutions. They have sophisticated resources to help them manage their portfolios - and they react very swiftly to news. Unexpected events tend to get translated into very rapid share price movements.

So, where should the eager private investor put their money? You have to start with America. Interest rates may have gone up on the other side of the Atlantic, but the US remains the most powerful economy in the world with the largest stockmarket available to investors. It is, in truth, the model that most countries seek to emulate. There may have been much talk of a stockmarket crash, following the long bull market, but the truth is that if US share prices dive, we cannot expect much respite on this side of the Atlantic.

The American market has just the same problems as we have in this country. New economy stocks have become popular, pushing legacy industries into the shade. Higher values are accorded to larger companies than to smaller businesses - unless they are involved in the internet. In part this is due to indexation. However, I feel simply buying an index tracker to be a cop-out, particularly in current circumstances.

There are plenty of good US fund managers around, but perhaps the one I would plump for in the difficult markets that persist today is Mercury, the UK investment management arm of the mighty Merrill Lynch organisation. The Mercury American Unit Trust itself has a solid long term record, achieving top quartile performance in its universe since launch and returning 13.7 per cent over the six months to the end of April, comfortably outperforming its benchmark, the S&P 500 Index. But it is in the disciplines applied in this fund that I think the private investor can take most comfort. For example, having benefited from the technology boom, the correction in early March, which was triggered by some key inflation indicators, led to an automatic reduction of vulnerable holdings because a sophisticated risk management structure was in place.

In markets that are as volatile as these, investors need to know that their manager is using the best systems available.

Brian Tora is Chairman of the Greig Middleton Investment Strategy Committee