Yet time and again investment experts say that in the long-term, shares offer the best way to achieve returns well above the rate of inflation.
One simple but effective way of smoothing out the volatility, or ups and downs, of the stockmarket is by making regular savings into a pooled investment such as a unit trust, investment trust or open-ended investment company (OEIC). For a start, investing in a fund spreads your risk over perhaps hundreds of different shares.
Many unit trusts and investment trusts offer regular savings plans. Foreign & Colonial, operates an investment trust savings plan with a minimum monthly contribution of just pounds 25. Investors can choose any or a combination of 12 investment trusts.
It is the process of pound-cost averaging (PCA) through which a regular savings regime flattens the bumps in a stock market ride. PCA basically means that if share prices fall, then that month your regular savings sum will buy more shares or units. If they rise, then you buy less.
So if the market suffers a marked decline, although the investment you have already made obviously shrinks in value, you can partially compensate for this by taking advantage of that fall to buy more at a lower price. This reduces the average buying price of the shares you own, which means your overall returns will be that much higher.
"You don't escape the market falls, but the likelihood is that you've picked up quite a lot of units or shares at lower prices," says Tim Cockerill of Bristol-based independent financial advisers Whitechurch Securities.
Timing is one of the biggest problems with share investment. "It is one of the great difficulties that large investors with millions and modest investors have in common," says Anne McMeehan of the Association of Unit Trusts and Investment Funds.
If you use a lump sum to buy shares, you might strike lucky and buy when the market is at a low and then see nothing but growth. But you face the risk of picking a time just before a fall and instantly losing a proportion of your capital. So it is safer to drip-feed that amount into shares. Then any fall will probably only have a drastic effect on money committed just before the slump. Money paid in many months before is likely to have appreciated enough to absorb the fall.
Of course most small investors opt for regular savings not because of the benefits of PCA, but simply because they have to. "It's just a way by which people who haven't got a lot of money can accumulate some capital - that's a great benefit of regular savings," says Mr Cockerill.
Embarking on a monthly investment plan also has the advantage of forming good savings habits. "The regular savings process actually creates a discipline to recognise the fact that it takes time to accumulate wealth," says Ms McMeehan.
The alternative to investing a regular amount directly in an investment fund might be to put pounds 50 a month away in a building society account, and then invest the lump sum at the end of the year in a fund. But the snag is that you could have chosen a 12-month period when the stock market had risen, and have lost out on potentially high returns.
Fund managers Fidelity offers regular savings options on its funds, with a minimum pounds 50 monthly investment. The group runs the popular MoneyBuilder range of OEICs which have no initial charge but an annual charge of between 0.5 and 1.5 per cent. The range of five funds includes a cash fund, index tracker and UK growth fund.
"Certainly monthly savings is a very popular option when the markets get more volatile," says Jane Drew of Fidelity. It is not just smaller investors who use this cautious approach. Sometimes even when a lump sum is available, people still choose to take advantage of the safety that PCA offers.
Through an option called "phasing", those with a lump sum to invest can have it drip-fed into Fidelity funds. "People who are concerned about the stock market volatility would see that as a useful way to smooth out the ups and downs," says Ms Drew.
Money waiting to be gradually invested in the funds is held in a Barclays high interest account, currently paying 5.12 per cent gross.
But unless you are very cautious, people with a lump sum to invest would generally be best advised to commit it to an investment fund when they are ready, says Tim Cockerill. "Market falls tend to be pushed into concentrated periods of time," he says.
So if history is anything to go by, you are more likely to chance upon a good time rather than bad to invest.
Whitechurch Securities: 0117 9442266; Unit Trust Information Service, run by AUTIF: 0171 207 1361; Fidelity: 0800 414161
THE EFFECT of regular saving during a falling market:
If the market fell 20 percent during a year, a lump sum of pounds 12,000 invested at the start would be worth just pounds 9,600 at the end. If the same amount were invested gradually - pounds 1,000 each month - the total value at the end would be pounds 10,817.
... and in a rising market:
Assuming the market rose steadily by 20 per cent in one year, the pounds 12,000 lump sum would be worth pounds 14,400 by the end. Regular monthly savings of pounds 1,000 throughout that year would have resulted in a smaller return, with the total value having grown to pounds 13,180.
Source: Whitechurch Securities