Everybody feels a desire to do something in times of turmoil, but the problem is that investors are inclined to act in precisely the wrong way, says Barclays Wealth.

The UK wealth manager describes in its latest Compass report how human psychology makes us feel more at ease taking risk in good times and avoid it when we feel uncomfortable. This leads investors to increase risk when markets have risen, and escaping risky assets when markets are falling. In other words: buying high and selling low.

Barclays Wealth advises investors to deal with what it dubs the “zone of anxiety” by rebalancing. This means that when assets increase in value so that their share of the portfolio grows, investors should cut back on holdings to bring them back in line with the long-term asset allocation. And when assets shrink as a share of the portfolio, investors should boost holdings.

Another approach the Compass recommends is simple diversification, which not only improves long-term risk-returns, but also reduces red in the short term, Barclays reckons.

The firm believes that both tactics can be applied to all possible future scenarios: “It would be a mistake to use this analysis to second guess what might happen next week,” the report says. “But over a three to 18-month timeframe, we can have a much greater degree of confidence in both our expectations for the future and the associated risk.”