John Redwood said that in the current low interest rate world investors need to take more risk if they seek a better return.
He said: “Shares can give you a return if you buy them when markets are in a panic, as they were at the end of September, and hold on for better times.
“In a world of low inflation and very low interest rates, the possibility of buying shares on a modest dividend income that will grow with the economies is about the best you can do.
“You just may need to be patient and have good nerves when markets worry too much, as they did this summer.”
He said it was likely the world economy would expand about 3 per cent this year, and continue growing next year as well.
Rosie Bullard, portfolio manager at James Hambro & Partners, said: “We are treading more carefully, but we do not see a need to panic.
“We remain overweight cash and have a preference for a greater proportion of absolute return vehicles to dampen equity market volatility.”