Talk to 100 financial advisers and you will hear 100 different views on where shares and bond markets are heading and what you should be investing in. Against this background, what are the ordinary investor and saver supposed to do? Play safe or plunge? But before starting any investment programme or changing an existing one, common-sense rules should be followed. Always have enough funds in the bank or building society to take care of any rainy day. Having to cash in an investment at the wrong time can leave the investor with substantial losses. Always make sure enough life assurance and other financial protection have been taken out to provide adequate cover.
The safest way to start an investment plan is to speak to a financial adviser. But before investing, check your chosen adviser's "terms of business" letter to establish whether the advice offered is truly independent or they are tied to a particular company. And make sure that your adviser has fully understood what you require and set out the costs.
Find out as much as possible before investing. If unitised funds are selected, look at the ownership of the management group. There is no foolproof way of guarding against dud investment managers, but the reputation of the investment house should ensure a reasonable degree of compensation for investors when things go wrong. Investors who are concerned about where stock market levels are heading are not obliged to commit themselves entirely to shares. Investing a set amount in unit trusts or insurance- linked investment plans on a regular basis can smooth out the peaks and troughs of investment. If you feel it is time to move out of equities altogether, most groups offer a low-cost way to switch funds. Pension funds, for example, often offer a choice of with-profits, cash or deposit- type fund. Capital growth bonds, which are usually linked to the performance of a major financial index over five or six years, could be a consideration, especially if there is a guaranteed return even if the chosen index shows a fall. Most but not all are based on the FTSE 100 share index or the Dow Jones 500 share index in the US. The Sun Alliance Carnation Bond is based on the Japanese stock market, which has been very depressed for the past six years but may well outperform over the next six. At the end of six years it will pay out 142 per cent of the initial investment plus half of any additional appreciation should Tokyo's Nikkei 225 index rise by more than 42 per cent.
"The key to successfully selecting investments is that before you can make money, you have to know how not to lose it," says Fred Carr of Carr Sheppards, a leading firm of private client stockbrokers and financial advisers. Carr Sheppards' booklet, Wealth Preservation, is especially for investors who have made significant gains and now want a portfolio offering a relatively high degree of predictable growth and income. It advocates a mixed portfolio of assets including index-linked securities which offer protection against inflation and small but growing income; endowment policy funds which offer low risk capital appreciation; and personal equity plans invested in zero coupon preference shares with fixed repayment values and maturity dates, and in investment trust income shares with above average income over their fixed life.
There is no such thing as a completely "safe" investment that does not avoid risk. But within normal limits and with common sense, you can go on investing even if the climate is uncertain