Whatever shares do, stay cool

This time three years ago investors were on a high. The FTSE 100 had peaked at around 6,900 and people couldn't get their money into equities fast enough. But the good times ended less than six months later, and since then the bear market has wiped thousands of pounds off the value of investments. It's been a miserable time and many investors have been reluctant to put more money into equities.

But is there any sign of an upturn, or are investors in for another bad year in 2003?

I remember speaking to fund managers and independent financial advisers (IFAs) in December last year. While they were, as always, reluctant to second-guess the markets, there was a feeling that shares had come back well after the events of 11 September and that, following 18 months of falls, investors would see some upturn in 2002. But then the full impact of the Enron accounting scandal became clear. Hard on its heels came similar problems at WorldCom. The continued uncertainty caused by terrorism and the possibility of war with Iraq has only made matters worse.

So after starting the year at 5,217, the FTSE 100 fell to 3,671 in September, its lowest level for over five years.

This, though, could prove to have been the turning point. Shares have picked up a little since September and for the past few weeks the FTSE 100 has been hovering around the 4,000 mark; it closed at 4,007 on Friday. The fluctuations in the market have also been less pronounced.

That said, the bottom of the market can only be seen with hindsight and we are still in a precarious position. But there are some good buying opportunities, and fund managers are hopeful the worst is over.

It is important that investors stay positive: whether the turnaround comes next month or in another year, if you've got money in equities, you're going to be there when the upturn happens and you will benefit from the gains. It could even be a good time to move some of the money you've been holding in cash back into equities.

But there are a few key points to bear in mind: invest carefully and seek advice when deciding which funds to put your money in. It may even be worth switching funds, as this is the time to have your money with the best stock-picking managers.

And when things do pick up, don't expect the spectacular returns we saw in the 1990s. Part of the reason for the current bear run is that growth at those levels was unsustainable. What's more likely in the future is single-digit growth of around 7 per cent.

Melanie Bien is away