Lean times mark post-millennium madness

'The picture painted is of a market moving sideways'

Hasn't the year flown by. It seems only yesterday that we were all worrying ourselves silly over the millennium bug. Now, here we are more than half way through the year. And if there is one aspect of the Year 2000 so far that is clearly plain, it is how difficult it has become to make money.

Hasn't the year flown by. It seems only yesterday that we were all worrying ourselves silly over the millennium bug. Now, here we are more than half way through the year. And if there is one aspect of the Year 2000 so far that is clearly plain, it is how difficult it has become to make money.

Towards the end of 1999, central banks were pumping money into the system to head off a possible liquidity crisis if the millennium bug disrupted financial transactions. The availability of a considerable amount of cash unfortunately coincided with a near hysterical rush into new economy stocks, which drove some sectors of the market into unsustainably high ground during the first few weeks of this year. Strip out the early flurry and subsequent correction, and the picture painted is of a market moving sideways.

UK investors may have lost money in the domestic stockmarket overall since the beginning of the year, but looking at the wider, international situation, they should have made a modest profit. This is because sterling has weakened sufficiently to deliver modest returns in many overseas markets. The exception is Japan, although this was one of the best performing markets in 1999.

But it is a rather dismal picture. Anyone solely following an Index Tracking strategy will certainly have lost money. Perhaps it is appropriate, that we are now seeing some of the most inventive Index Tracking vehicles ever. Barclays Global Investors has introduced I-shares, an Index Tracker that can be traded on the stockmarket, allowing you to time your purchase in or out of the market to the minute. Then there is QQQ, the NASDAQ 100 Index Tracker, which is being promoted over here following its success in America. In just over a year, QQQ has attracted some $14bn of assets in the US. Expect NASDAQ to make it even more accessible to UK investors as time goes on.

In America, of course, they have more sophisticated tracking vehicles. Over there it is possible to purchase funds that follow a specific industry, which could prove useful to any private investor who considers themselves nimble enough to leap on and off bandwagons. Be warned, though. With greater opportunity comes more risk. It seems most likely these more targeted indexed funds will be most popular with professional managers.

But, in the end, you will find that the most consistent outperformers of their benchmarks are those funds run by stockpickers - and it is having the discipline to research and monitor shares that separates the men from the boys. Any private investor seeking to take this approach needs to plan their approach very carefully. Fortunately there is an ever widening flow of information on individual shares available but if this approach looks to be beyond your capabilities, there are plenty of good managers out there. Perhaps we might look at a few in greater detail in the weeks ahead.

Brian Tora is Chairman of the Greig Middleton Asset Allocation Committee