Things don't look as if they are easing up in 1999 either. While we can hope for an easier time, it may be in vain. Interest rates look set to fall further, which will reduce the real rate of return on cash deposits.
Nor is there a clear sign that stockmarkets will stabilise to compensate investors with higher returns on equities. After all, rates are being cut as a means of stimulating economic activity, and bringing about recovery, the effect of which may take time to filter through into share values.
On the other hand, periods of market uncertainty can leave shares looking undervalued and create real opportunities for those prepared to take a risk with their cash.
All of this presents investors with a stark choice; go defensive and risk losing out if the market rises sharply, or go aggressive and risk losing if the market falls.
Christine Ross of Willis National
With the UK stockmarket displaying a schizophrenic personality - one minute bear, the next bull - many investors will wonder where the best opportunities lie. Add to this a sell-by date for Tessas and PEPs and confusion could set in.
Asset classes: Tessas, corporate bond funds, with-profit bonds.
Tessas are tax-free cash deposits, accounts running over five years to maturity, which will let you shelter up to pounds 9,000 if commenced before 5 April. Nat West is still offering their fixed rate Tessa paying 6.4 per cent - this includes a "feeder" account - which is excellent value.
Corporate bonds are effectively loans to companies in the same way that gilts are loans to the government. Unless you are an expert, the best way to buy these is through a unit trust where a fund manager makes decisions on your behalf.
Use a PEP to shelter your bonds and receive income tax free. Two of the best providers are M&G - with lowest charges in the market - and Aberdeen Prolific.
With-profit bonds issued by large insurance companies like Clerical Medical offer security of capital against all but the most serious market melt down. Returns are given in annual "bonus rates", and these funds are intended to smooth out fluctuations in the market.
Asset classes: unit and investment trusts in Japan and the Far East, European smaller companies, and UK enterprise funds.
Any aggressive portfolio must focus on "recovery areas" where shares look undervalued. The bravest investor might buy Japan and the Far East, where Pacific Rim countries offer tremendous opportunities over the long term. But be careful, as some investors lost as much as 80 per cent of their money last year. Europe offers some great opportunities and is my favourite market at present.
Closer to home, Schroder's UK Enterprise fund invests into a narrow range of larger company shares - about 50 in all, against an average of between 80 and 150 for most rival UK funds. Enterprise currently holds shares in firms like Vodafone and Asda and aims to benefit from any market recovery.
Fiona Price of Fiona Price & Partners
This is a year when investor sentiment might go either way - choosing defensive or aggressive portfolios against a background of sometimes confusing signals from the market.
Asset classes: National Savings, Tessas, distribution bonds, with-profits and income funds.
There are only two ways to build a defensive portfolio; either put all your cash into very cautious investments, or split the portfolio between very cautious, cautious and medium risk categories of investment.
Very cautious is a category covering short- to medium- term needs. Hold an amount equivalent to at least three months' normal expenditure on deposit in an emergency cash reserve.
Both National Savings and Tessas offer secure returns. High-rate taxpayers should look at index-linked National Savings certificates, which offer complete capital security.
For cautious investments look at distribution and with-profit bonds from insurance companies. With-profits bonds also offer defensive asset allocation. Among medium-risk investments, look out for a growing number of unit trusts which offer some capital guarantee against market falls - Edinburgh Fund Managers' Safety First fund is one we like.
Asset classes: UK high income and smaller company funds, European smaller companies, global technology.
The key to this sector is understanding that if you narrow the sector you are investing into, then the risk goes up.
UK funds like Perpetual's High Income can offer a combination of relatively low volatility with excellent medium-term performance if income is re- invested for growth.
Venture capital trusts are far riskier. Offering valuable tax breaks, they invest in small, unlisted UK shares, a sector currently very undervalued.
Finally, look at themed investments, like Henderson's Global Technology trust, which buys shares in high tech companies around the world, thus avoiding too much exposure to a one national stock market.Reuse content