Concerns over Europe's debt crisis and fears that the US economy will fall back into recession prompted the FTSE 100 index of Britain's biggest companies to plummet by over 14 per cent last week.
The index closed at a 13-month low last Wednesday at 5007 after shedding 157 points, before markets rallied towards the end of the week, following the release of figures showing a fall in US unemployment claims.
Meanwhile the gold price hit a new record high of over $1,780 (equivalent to around £1,095) an ounce, as investors flocked into traditional safe haven assets.
Here, we take a look at why markets are so volatile, and what savers and investors should do next...
Why are markets so turbulent?
The downgrade of US sovereign debt by ratings agency Standard and Poor's triggered the massive equity market sell off at the start of last week, while doubts surrounding Italy and Spain's ability to finance their debts added to the volatility.
Many believe that the market rollercoaster ride is far from over given continuing turmoil in the Eurozone and the threat of potential slowdown in the US. Read our article 'What do credit ratings mean' to find out more about why the downgrading of the US government's rating has rocked markets.
What should I do about my existing stock market investments?
Selling your investments now means you will only crystallise your losses.
While it may be extremely worrying seeing the value of your funds fall, you should try and sit tight and take a long term view. Investors frequently make heavy losses by panic-selling, so most experts are recommending that people try to weather the current storms.
More adventurous investors may even find buying opportunities, with many shares cheaper than they have been for years.
Remember, however, that investing in individual shares is a highly risky strategy, and should only be considered if you are prepared to lose what you have put in.
Choosing a pooled fund such as a unit trust is usually a better option for those unwilling to accept such a high level of risk. These involve large numbers of investors pooling their money and entrusting it to a unit manager.
This manager will be a specialist investor who can use their expertise to seek out investment opportunities across the world.
What if I'm about to retire?
Unfortunately members of defined contribution (DC) pension schemes on the cusp of retirement could be hit by a double whammy if the present volatility in stock markets continues.
Malcolm McLean, consultant at Barnett Waddingham, warned: "For those wholly or substantially invested in equities the value of their pension pots is likely to have reduced significantly in recent weeks.
This means that less money would be available to purchase an annuity with a potential reduction in retirement income for the rest of their lives as a result.
"At the same time the annuity rates being offered by insurance companies are being affected currently by investors who, concerned about the falls in global equities, are looking to buy safer investments instead.
This creates an abnormally high demand for gilts with yields from them dropping as a result, which in turn was a materially adverse effect on annuity rates.
"It is not known how long this situation would persist but all DC members contemplating retirement should seek professional advice before committing themselves to any particular course of action.
Members of defined benefit or final salary schemes are not directly affected by falling stock markets although there is always the worry that any large increase in deficit levels might persuade even more private sector employers to give up on their schemes which would disadvantage workers going forward.
What is the best way to avoid volatility?
If you want to continue to invest in the stock market, then drip-feeding your money in can help smooth out volatility.
Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: "Regular investing each month gives you a lower risk profile by helping to smooth out some of the stomach churning highs and lows in the price of shares.
Known as 'pound cost averaging', it means investors buy less shares when prices are high and more when prices are low and do not have to worry about deciding when the best time to invest is."
You should also review your portfolio to ensure it is well-diversified and balanced. Spreading your investments over several different investment and geographical areas will help limit your losses when markets suddenly drop.
Are my savings accounts safe?
Yes, these won't be affected by stockmarket volatility, so you don't have to worry.
Savers also have protection from the Financial Services Compensation Scheme (FSCS) which covers the first £85,000 per saver, per authorised institution in the event that an authorised bank or building society goes bust.
Remember that many savings providers share a banking licence and lots of people therefore may have accounts with two or three different institutions operating under the same licence.
Read our article 'Who owns who?' to ensure that you are fully protected
I need to move some of my savings around - where are the best homes for my money?
If you are looking to spread your savings among several different providers, the good news is there are plenty of high interest accounts to choose from, even though the base rate is still at 0.5%.
Coventry Building Society's Poppy Online Saver account, for example, pays 3.15% annual interest on a minimum investment of just £1 and allows you up to four penalty-free withdrawals a year. The rate includes a bonus of 1.15% payable for the first year so you may want to move your money when this disappears.
Another account worth looking at is the Post Office Online Saver account. This account, which pays 3.01% annual interest before tax can again be opened with as little as £1 and you can make withdrawals whenever you want. The headline rate includes an introductory bonus of 1.36%.
Fixed rate bonds are also worth considering if you want even higher returns. These usually offer terms ranging from six months up to five years, and the longer you are prepared to tie up your money, the higher the amount of interest you will receive.
The Post Office's one-year, two-year and three-year Growth Bonds, for example, pay 3.41%, 3.96% and 4.21% annual interest before tax respectively. You need a minimum investment of £500 to apply for the Growth Bonds and the maximum you can invest is £2 million.
If you have yet to use your annual tax-free individual savings account (ISA) allowance this tax year, then Northern Rock's e-ISA Issue 19 account pays a fixed rate of 3.20% tax-free for a year on a minimum investment of £500. This account accepts transfers from other ISA providers.
Alternatively, Northern Rock pays 3.55% annual interest tax-free on its e-ISA Issue 20 account, and the rate is fixed for two years. Again this account can be opened with a minimum investment of £500 and transfers from other providers are accepted.
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