Even if you have a sizeable amount to spread around, you are just as likely to select a poor-performing portfolio of shares unless you have the time and the knowledge to keep a daily eye on it. This is where unit trusts and investment trusts come in, since they offer investors a way to reduce the risks. Such funds should out-perform other types of investment such as building society accounts - although they will not outperform the individual out-and-out winners in the stock market stakes.
Over the last five years, for example, if you had tucked away pounds 100 a month in a building society account at 90 days' notice, it would now be worth around pounds 8,000. The same amount put away into a reasonably performing unit trust would be worth more than pounds 12,000.
Most of the personal equity plans which are widely advertised by the large fund management groups invest your money in unit trusts or investment trusts, which means that your earnings are totally tax-free.
There are literally hundreds of funds to choose from. They range from general funds investing in well-established UK companies to specialised ones which may invest in high-risk/high reward sectors such as health care and high technology or in particular countries or regions such as North America, the tiger economies of South-east Asia or Latin America.
If you want to check the performance of a specific fund, you can find the latest data on the managed funds page in The Independent every Saturday.
The main problem any investor faces is timing. Private individuals always want to buy units or shares when prices are high. When stock markets are falling or dull, they tend to stay out of the race. Yet the best way of making money is by buying when prices are low.
The unit trust and investment trust industry has the answer to this. Most of the best management groups offer investors monthly savings plans from as little as pounds 20 a month.
They also usually carry no additional charges. And, of course, many Peps are available for regular savings, making the long-term investment free of both income and capital gains taxes.
By saving on a regular basis in an investment or unit trust, the investor benefits from what is known as "pound cost averaging". Very simply, this means that when prices are low, investors will get more units for their money, less when prices are rising.
Over the long term, when investors should have experienced all types of falling and rising stock markets, they should have averaged out the swings and roundabouts and accumulated a significant capital sum.
Over the past 10 years, for example, if you had invested pounds 100 a month into one of the top-performing funds, you would now be sitting on an investment worth more than pounds 25,000, far better than any building society investmentn