THE share market has been hammered again this week, but analysts say investors should refrain from being caught up in panic-driven selling and instead look to ride out the financial storm.
Tens of billions of dollars have been wiped from the value of the Australian sharemarket this week as fears of a US recession continued to percolate.
A string of massive corporate losses in the US, stemming from the global credit crisis, have added fuel to the fire that has seen the local bourse dive by almost 15 per cent since hitting a record high on November 1.
This week alone, US banking sector heavyweights Citigroup, JPMorgan and Merrill Lynch reported huge write-downs linked to the US sub-prime mortgage meltdown.
Citigroup announced it had written off a massive $US18.1 billion ($20.17 billion) and posted a fourth-quarter loss of $US9.83 billion.
JPMorgan, meanwhile, announced it's quarterly profit had fallen a worse-than-expected 24 per cent after it lost $US1.3 billion on risky mortgages and set aside more money for rising losses on home-equity loans.
And Merrill Lynch, the world's largest brokerage, lost nearly $US10 billion in the fourth quarter, its biggest quarterly loss since it was founded 94 years ago, after writing down $US14.6 billion of investments related to the ongoing credit crisis.
The losses in the US have seen Wall Street continue to tank, dragging the Australian market with it.
But CommSec equities Analyst Juliana Roadley said the Australian sharemarket remained a good vehicle for retail investors, adding that the current environment would also present some bargains.
"Everyone is in a panic mode ... they're not looking at the fundamentals,'' she said.
"The book value and the face value of (a lot) of companies listed on our exchange at the moment are well above the value of what they're being traded at.
"So the share price values are way below where they should be.''
Nonetheless, Australian share prices have fallen amid the turmoil, prompting many so-called `mum and dad' investors to question whether the the stock market is the right avenue in which to sink their savings.
But Ms Roadley said that rather than panic, investors should look to ride out the troughs.
"Don't get panicked, don't sell out - you might have some really good assets there.
"Okay, you're going to see a bit of a fall, you might lose six months worth of growth, or in some cases eight months worth of growth, but then you've got to buy back in.
"You've got to sell out and pay brokerage, then you've got to buy back into the market at a lower level.''
And typically, like after every correction, there are likely to be some bargains to be had by investors.
The trick is predicting when the market will bottom out.
AMP Capital Investors chief economist Shane Oliver said the current environment presented some good opportunities - particularly for long-term investors.
"I think there's lots of value there now ... in a valuation sense the market is starting to look pretty attractive,'' he said.
"For long-term investors it's a good time to buy ... for a short-term investor I would probably stay out for the time being.''
Dr Oliver said the main factor driving shares down was falls in US markets driven by recession fears.
"It's quite easy to get caught up in this environment ... big falls in the market and headlines screaming US recession and a bear market.
"But it is a $1.5 trillion share market, so in the great scheme of things it's not that disastrous - it's quite normal for the market to have 10 to 20 per cent corrections and we're pushing towards the top end of that.''
"I don't necessarily think we're at the bottom yet but one approach is to average funds in over the next few months to take advantage of good buying opportunities which are now evident.''
"Often by the time people get out the bulk of the falls are over, and by the time they get back in the sharemarket has already recovered.''
"The biggest mistake an investor can make is to get out in a panic.''
ASX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)