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Shares suffered a stormy October once again this year. The big question when markets slide is whether it’s a buying opportunity, or the start of a serious correction and time to take cover.

In the latest instalment of his Diary of a Private Investor, This is Money columnist John Rosier reveals how he dealt with a turbulent month.

Tough decisions: When markets are hit by turbulence investors need to decide if it’s an opportunity — John Rosier reveals how he reacted to the October storms

October is often a volatile month and this one was no exception. At its lowest point the FTSE All Share was down 8 per cent, while the S&P 500 was down 7.7 per cent, the Japanese Nikkei 10.1 per cent and the German Dax 11.8 per cent.

You knew it was bad when the markets headlined on the 10 o’clock news and Robert Peston was popping up all over the place, opining on what was behind the market turbulence.

As is often the case that marked the bottom, with strong rallies across equity markets in the second half of the month — the US S&P 500 Index closed October at an all-time high and the Japanese Nikkei 225 at a seven-year high.

Sudden market sell-offs can be savage with stocks, especially smaller ones, bouncing all over the place and it doesn’t half play with your emotions — fear takes over from greed and the market is screaming at you to sell everything and get out while you can.

This is the time to step back, look at your holdings and remind yourself why you hold them. In my opinion, unless something has fundamentally changed it is best to block out the noise and sit on your hands.

I went into the sell-off pretty fully invested. It’s easy with hindsight but as the market hit new 2014 highs in September I should have taken some profits in stocks that were a little over extended thus giving me some ammunition for any pull-back. On this occasion I was neither clever nor lucky enough to have done so.

With what little cash I had I added to an already largish position in Renew Holdings when it dropped 10 per cent to 282p on the morning of the 10th October. I traded out the cheap stock I had acquired just nine days later at 310p to prevent the holding becoming too large. I also picked up a few Berkeley Group at 2081p, now 2290p.

I go into the last two months of the year fully invested and whilst I hate trying to predict markets I can’t help feeling reasonably confident after October’s blow off.

Interest rates in the UK and US look to be on hold for some time, Japan is embarking on a new round of monetary easing and surely it can’t be long until the European Central Bank follows suit.

October’s investments: Buying into Next and a small cap biotech company

Despite the noise on the stock markets it was a quietish month for the JIC portfolio. I cut my position in BlackRock World Mining at 420p, luckily just before the share price was hit by the demise of London Mining and I took my profits in Thorntons, sold at 105.3p.

I invested the proceeds from Thorntons into Next at 6,580p following the first ‘warm weather’ related warning. I think it is superbly managed and in my opinion stands out above all other FTSE 100 companies in its commitment to enhancing shareholder returns through both share buybacks and special dividends.

The weather will at some stage become more seasonal allowing it to make up some lost sales and although admittedly it may come too late this year to avoid markdowns it doesn’t really change the longer term case for the shares.

I added a new smaller company, Bioventix, paying 690p. It develops monoclonal antibodies for use in diagnostic testing for amongst other things Vitamin D deficiency, heart failure, thyroid stimulating hormone and testosterone levels. Its core customers are the large multinational diagnostics companies.

It is growing at a decent pace, is highly profitable and cash generative, is on a forecast prospective dividend yield of 4 per cent and looks to have great prospects. It is a small company with all the inherent risks and unfortunately the bid/offer spread is wide. I funded the purchase by cutting the holding in Fox Marble, another small company, in half.

A TOUGH YEAR FOR THE MARKET 

The FTSE All Share (Total Return) Index, which includes dividends was down 0.7 per cent in October and since January 1st is still just in negative territory, -0.1 per cent.

Despite a valiant effort on the last day, the JIC Portfolio lagged the index very slightly in October falling 0.9 per cent but since the start of 2014 it is up 4.5 per cent.

Since the inception of the JIC Portfolio on January 1st 2012 the index is up 35.5 per cent, while the portfolio is up 79.4 per cent.

2014 has, so far, been poor for smaller companies which have lagged the FTSE 100 by some margin.

Since the mid-month lows there have been signs of life with the indices participating in the recovery but despite this, over the month as a whole the indices were still behind.

FTSE Small Cap was down 1.0 per cent, FTSE Fledgeling down 2.6 per cent and FTSE AIM down 4.0 per cent.

Winners and losers in October

The winners in the JIC Portfolio were Polar Capital Management, up 11.9 per cent, after a very strong last day in response to the announcement of further monetary easing by the Japanese Central Bank — Japan accounts for around 40 per cent of its assets under management.

The portfolio’s largest holding, The Worldwide Healthcare Trust, continued to make steady progress, rising 9.4 per cent to an all-time high as did its sister trust, The Biotech Growth Trust, up 8.0 per cent.

Newly-merged DixonsCarphone gained 7.6 per cent, Interserve 5.7 per cent, helped by some new contract wins and easyJet continued to recover, up 5.4 per cent on the back of continued strong passenger growth and the weak oil price.

In general, the losers were smaller companies with the overall damage to the portfolio mitigated by the fact that they were also some of the smallest holdings.

Coms plc dropped 20.6 per cent after interim results on the last day did not do enough to convince markets that profitable growth was imminent, Gem Diamonds fell 19.1 per cent, Fox Marble fell 14.1 per cent, Regenersis fell 9.3 per cent and Plastics Capital fell 8.0 per cent.

THE JIC PORTFOLIO ON 31 OCTOBER 2014