Ask Sindie: Will a stock-market virgin be lured by a sexy sector?

Your money problems solved

The growth figures look impressive - but am I taking too much of a risk if I put my money here? I can afford to continue saving cash as well as making this investment.

MW, Walsall

A: You're not alone in being interested in the UK's commercial property sector. Thousands of ordinary investors have poured money into funds like New Star's, hoping to make a profit from the nationwide growth in the value of offices, warehouses and shops.

These funds invest your cash in buildings ranging from City of London headquarters to small regional factories. They aim to make money from rental income and rising property values. As the funds avoid the UK residential market, their fortunes are not tied to house price fluctuations.

And so far, they have performed well. The IPD UK All Property index, which tracks the sector, rose by 17.5 per cent in the 12 months to 1 July this year; over three years, the growth was 14.3 per cent.

But compare this with rises in the FTSE All Share index of companies during the same periods: up by 18.75 per cent over 12 months and by 25.3 per cent over three years.

How individual investors have fared will have depended on their choice of fund. If you had put £1,000 in the New Star fund three years ago, you would have £1,298 today according to the ratings agency S&P. But you would have got a better return on your money with rival property funds from Aberdeen Asset Management and the insurer Norwich Union.

More importantly, though, you should not put all your eggs into one investment basket.

Justin Modray of independent financial adviser Bestinvest says: "Provided you have sufficient 'rainy day' money tucked away, it's certainly a good idea to seek attractive returns for your surplus savings.

"However, make sure you appreciate the risks. Commercial property has historically been less volatile than the stock market, but this is not to say you can't lose money.

"Far better instead to spread your money across several investment funds (perhaps including New Star Property) covering a broad range of asset types and sectors."

Q: Our house has rocketed in value and is now worth about £350,000. My wife and I are approaching retirement and want our children, rather than the taxman, to benefit from the house when we die.

Is there a trust that we can lawfully set up to protect our property?

FC, via email

A: The value of an average home has doubled in 10 years. This has made inheritance tax (IHT) - 40 per cent of any estate over £275,000 - a concern for many families.

One way to protect your home is for you and your wife to set up a "discretionary will" trust. You rewrite your will to put half the property's value (up to the £275,000 limit) into a trust upon the first spouse's death. After you have both died, the value of the estate passed on to your children is reduced by this sum. As with all IHT planning, you should take advice from a solicitor or accountant before coming to a decision. If you want to go ahead, he or she can then make the necessary changes to your will.

If you need help from our consumer champion, write to Sindie at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email sindie@independent.co.uk. We cannot return documents, give personal replies or guarantee to answer letters. We accept no legal responsibility for advice.

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