Nic Cicutti picks his way through the investment minefield
THE MOMENT you decide that you want to invest your hard-earned money, you will be swamped by insurance companies, fund management groups, banks and financial advisers, clamouring to sell you their products.

Choosing the right product becomes highly confusing. Here is a brief list of the questions you should bear in mind when looking for the investment to suit your needs.

First, ask yourself what your own attitude to risk is. There is no point investing in a UK smaller companies fund, which has been subject to regular stockmarket swings, if something safer, like a with-profits bond, is more sensible.

Second, decide whether your primary need is for income or growth. This should be simple but is complicated by the fact that some "income" funds have delivered exceptionally good growth in recent years. If you re-invest income now, you may be able to take it a few years down the line, when you may be in greater need of it.

Third, find out that company's performance. Don't just look at one-year performance. Look for one, three, five and even seven and 10 years' worth. The fund need not always be in the top 10. But it should aim to be consistently in the top "quartile", the leading 25 per cent of funds in any one period.

Fourth, watch out for volatility. This is where some funds can rise like rockets and fall back just as quickly. They may seem good performers, but this is at the potential cost of your money. The Independent will shortly be publishing "volatility" ratings for leading funds.

Check charges. There is no point in a splendid performance if a fund manager eats away half of it through hefty fees. At the end of the day, most funds will deliver very similar performances. The one thing that sets them apart is the annual charge levied on each one. Over a 10-year period, a 0.5 per cent annual difference means a pounds 100,000 fund could be worth pounds 5,000 more.

Finally, how long the fund manager responsible for any out-performance has been in place (they may just have decamped to another firm).

Doing your homework and asking the right questions will not necessarily guarantee that you find the fund that will make you rich. But it will reduce the likelihood of being sold a pup.