Despite various financial programmes initiated by world leaders last week to boost liquidity and to avert a global financial crisis, the stock markets kept on falling.

Until a week ago there were still those who believed that the situation would eventually stabilise itself and that some countries wouldn't be affected - but this has not happened.

Volatility continued to plague world markets with share prices in Tokyo, for example, slumping more than 11 percent on Thursday after huge losses on Wall Street the day before - the worst fall on the US stock market since 1987.

Though all the emerging markets were under pressure, the impact of the turmoil on our local bourse were shielded by the rand, which fell to its lowest level, trading at R10,87 to the dollar and R18,76 to the British pound last Thursday.

The concern is, why are markets still falling despite the commitment of and much activity among the G7 and European finance ministers to quell the turmoil?

Can we expect any good news at all and, if not, what should investors be doing?

Jeremy Gardiner, director at Investec asset management, believes the effect of the credit crunch on growth, jobs and earnings is by no means over and will be with us for several years to come.

Though there is hope that the stock markets have reached the point at which it is possible for stability to return, Gardiner doubts this since the markets are still skittish.

His opinion is that they will remain so for a while.

"Volatility is unfortunately going to be with us for some time to come and investors need to understand this fact, accept it, and not allow it to distress them every time markets sell off," he advises.

He says like a tsunami the tide had momentarily retreated, giving us a false sense of security that we won't get wet.

"Well, the tsunami hit the rand this week (last week) and economically we will feel this for some time to come," Gardiner says.

But there is also good news, he says, because of the declining oil price, which means lower fuel prices, food prices and ultimately inflation will stabilise.

In addition, there are visible signs that interbank lending is starting to loosen up.

He describes these as "probably" (and hopefully) the most extraordinary times investors will see in their lifetime.

He advises investors to be very wary of making extreme portfolio adjustments.

He warns investors that during times of an extremely high risk of "investment whiplash", the chance of selling or buying at the wrong time is significantly heightened.

He believes that there are significant opportunities out there if tempted to buy, but investors should look at a long-term investment horizon.

"There is a lot of money sitting on the sidelines, trying to time the bottom to signal their buy-in," he says.

"Similarly, there is a lot of money terrified of further losses and which simply cannot afford to lose more, hence the volatility."

He says the bottom, when it comes, might be with us for a while - so there should be plenty of opportunity to phase funds into the market when it eventually stabilises.

He says it is times like this that illustrate clearly the benefits of portfolio diversification.

"Investors with the foresight to diversify according to their specific risk profiles in the good times are now reaping the benefits of protection in the bad times."

"We have weathered crises of our own in South Africa (such as the small cap bubble in 1998).

"What has helped our clients to survive previous crises was the fact that we diversified their investments into international assets.

"What will help them to survive international crises like this one will be diversification into local assets.

"Good diversification is what will help our clients get through challenging times such as these" concludes Jeremy.