Global stock markets have experienced an astonishing rally since the end of September.

Between October 1 and close of trading on October 23 the MSCI World Index of developed stock markets had risen eight per cent while the MSCI Emerging Markets index was up 9.7 per cent. This trend continued into early November.

This rally is in sharp contrast to the third quarter - which turned out to be the worst-performing three months in four years.

However despite the buoyancy there remains a list of potential triggers that may very well break this rally not least if the US Federal Reserve raises interest rates before the American and global economies are ready.

As such investors should be prepared for volatility - and not just now but always. Why? Because the markets can turn on a sixpence and whilst market turbulence can damage returns if it is managed correctly - and this management is the key - it can bolster portfolios.

For example a portfolio that has zero volatility would have zero chance for loss. But it would also have very little or no chance for return. A bank account is a perfect example of a low-volatility investment. Bank accounts are usually backed up by government guarantees so there's zero risk involved. However they also offer minimal levels of interest. It would be nearly impossible to beat inflation with such a low-volatility investment.

On the other hand a portfolio with high exposure to emerging market stocks could offer extremely high levels of return. However that type of portfolio would also be exposed to substantial levels of loss. The returns may be high but the volatility may be as well.

The key is to find a portfolio somewhere in between the two options. Eliminating volatility completely also eliminates the possibility of return. Embracing volatility too much can bring excessive levels of risk. So how can you manage volatility?

Diversification

This is arguably the most critical step toward managing volatility and therefore making it work in your favour. Failure to diversify a portfolio is widely regarded as one of the most common investment pitfalls.Not having all your eggs in one basket reduces the risk that all of the asset classes in your portfolio will go down at the same time.

The important thing is to diversify in a way that is consistent with your risk tolerance.In addition real diversification means a real and suitable balance across asset classes geographical regions and industrial sectors.

Those who have a well-diversified portfolio will also be best placed to take advantage of the opportunities that will be presented in times of increased turbulence.Volatility always brings an upside with it too and investors should seek a good fund manager to help them take advantage of and benefit from the right stocks at the right time.

Dollar cost averaging:

Dollar cost averaging is another useful way to help manage volatility. In a dollar cost averaging strategy you contribute a fixed amount regularly for example weekly or per month and this amount is directed into a pre-set allocation of investments.The way it reduces volatility is that if the investment's price is high your amount will buy fewer units. If it's lower your investment amount will buy more units.

Another key benefit of dollar cost averaging is that it helps you get into the habit of saving regularly and this can only be a positive step in the right direction.

Long horizon investing

In many situations we have seen that volatility itself isn't the major issue - rather it is how investors respond.For example often investors decide that they should sell if there is a sudden or even prolonged drop in value.Whilst these sentiments are understandable often they solely serve to turn what is a potential loss into an actual one.

History shows that in many cases it is better to hold and wait for the market to pick up which it usually does eventually. Typically short-term volatility should not be much of an issue if you're building a retirement nest egg and you're not planning on retirement for a decade or more. Indeed you can probably withstand some turbulence to get better returns.

The ideal way to manage volatility is with professional advice. An expert adviser will help you better focus on your time horizon tolerance to risk and select the most appropriate investment and financial solutions.

The writer is the division manager for the Gulf region at deVere Group. Views expressed are his own and do not reflect the newspaper's policy.