Bloomsbury Financial Planning

Cautious investors bolstered holdings in cash and bonds but more adventurous types saw the chaos as a buying opportunity and increased their stakes in funds offering exposure to Europe, Brazil, Russia, India and China and large cap stocks.

"It's a very challenging time which is testing investors' mettle," said Philippa Gee, investments director at the advisory firm Torquil Clark.

Mark Dampier, head of research at Hargreaves Lansdown, the UK financial advisory firm, claimed funds offering exposure to gold - which now costs more than $1,000 per troy ounce - and Russia were particularly popular choices.

Jason Butler, partner at Bloomsbury Financial Planning, said his clients' exposure to the FTSE all-share index increased while index-linked gilts were sold as the fluctuations in share prices forced the automatic rebalancing of portfolios. "When you have big swings either way, it breaches the allocation levels you've set. This is where rebalancing comes into effect. We're going through the eye of the storm and this is to be expected."

On the whole, however, private investors seemed prepared for the rollercoaster ride, with few withdrawing from the markets entirely.

Pensions

Stock market volatility brings concern for pension savers, particularly those nearing retirement, as equity falls could wipe out a chunk of their funds.

Asset values in many company schemes and private pensions have fallen. Annuity rates - the rate at which savings are translated to income - also remain low.

According to financial adviser Hargreaves Lansdown, the annuity rates available now would provide a pension income about 20 per cent lower than last year.

Pension schemes generally have some level of equity exposure. The impact of market uncertainty will vary according to the type of pension held.

Those in salary related or defined benefit pensions, where the level of pension has been guaranteed, will be largely unaffected. But savers in money purchase or defined contribution schemes are likely to have seen their portfolios suffer.

Pension providers say there is likely to be an increase in the number of retirees using a drawdown option to take a tax-free cash lump sum now but defer income until stock markets improve.

As pensions are intended to be long-term investments, providers say future investment growth over the next five to 10 years should make up for recent losses experienced, and have urged investors to maintain a sense of perspective.

Mortgages

The collapse of Bear Stearns has injected another bout of nervousness into the UK lending market. Banks were already cautious about lending to each other and have had their doubts reaffirmed this week.

It has become increasingly difficult for lenders to access funding. The rate at which they lend to each other is significantly higher than the base interest rate and many are having to withdraw competitive mortgage products from the market.

Lenders are also keen to weed out higher risk borrowers. Many have reduced their maximum loan-to-values and they are also taking a tougher stance on borrowers with blemished credit records. The market for mortgages offering 100 per cent or more of a property's value has all but dried up and it is becoming increasingly difficult for borrowers on cheap fixed-rate deals to find a new competitive rate.

Mortgage costs are rapidly rising as lenders reprice their best deals upwards.

Many two-year fixed rate deals are now 5.5 or 6 per cent, while trackers typically cost at least a quarter point over base rate. Brokers expect costs to continue to rise in coming months, even if there is another base rate cut, as lenders can no longer get hold of cheap funding.

Savings

The flipside of banks not being able to access the wholesale funding markets is that they are increasingly having to rely on deposits from savers. Banks are therefore offering some very attractive interest rates on fixed-rate bonds and other savings accounts.

A number of providers are offering one-year fixed-rate bonds that are paying between 6.5 per cent and 6.7 per cent - a big premium over the Bank of England base rate. Many tax-free cash individual savings accounts and online accounts are also paying 6 per cent or more. These rates could look extremely attractive for investors looking to take shelter from the volatile stock markets.

Savings rates could be reduced, however, if the Bank of England lowers base interest rates. Rate cuts are typically passed on to variable rate savings accounts fairly quickly.

If the funding crisis does not improve, lenders might well try to keep their saving rates high to attract new funds. But it still might be worth locking into a high fixed rate now.