Don't let the bad boys put you off

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The Independent Online
You Don't have to look too closely for reasons to be put off the City and the stock market at the best of times.

For some it is the arrogant swagger of the worryingly young men who seem to inhabit this world of mind-boggling sums of money; for others the topsy- turvy way of seeing the likes of a large-scale redundancy announcement as "good" news. Or perhaps it's the arcane jargon of investment, or the risks to hard-earned savings the financial world blithely seems to assume you will want to take.

Add in a good dose of scandal - or, to be precise, two serious, high- profile scandals in as many weeks - and, arguably, you could be forgiven for complete disillusionment.

Last week it was Morgan Grenfell, a supposedly pukka investment manager that takes the money of little people who have just got used to the virtues of tax-free PEPs or unit trusts, that was on the evening television news. One of its "investment professionals" has been suspended and his assets frozen for what were described as "potential irregularities". Morgan's German parent - the dour-sounding Deutsche Bank - put up pounds 180m of its own money - more than 10 Princess Di divorce settlements - to shore up the affected funds.

Only the previous week a rogue investment manager was unmasked at Flemings - another blue-chip City name. The manager, who was at the bank's Asian arm, Jardine Fleming, in Hong Kong, had been mixing up his own investments with those of his investors. Again huge sums were involved.

It would be a shame, however, if people took the view from all this that stock market investment is simply not worth it.

Both scandals point to a worrying lack of control at the firms concerned - the ability of entrusted individuals to cause mayhem. But investors should not assume they will automatically be out of pocket when something goes wrong. Morgan Grenfell, for example, has said it will compensate investors for losses. And for British investment firms without deep-pocketed parents, there is an industry compensation fund.

Also, despite problems such as these, stock market investments such as PEPs and unit trusts have time and again proved their worth by giving better returns, over the long term at least, than leaving money in the building society.

Turn your back on the stock market and you turn your back on the prospect of these higher returns. But equally there is no need to throw caution to the winds. Just as you shouldn't have all your savings in one share, for example, don't place all your money with one investment company or in one type of investment. You can invest in shares in different stock markets as well as property funds and bonds - debt issued by governments - or companies.

Bigger investment firms might not only help you sleep at night but also prove their worth in other ways. If a star investment manager leaves a big firm, arguably that firm should be better able to replace him.

And what about the 90,000 investors with Morgan Grenfell? Investors have already withdrawn more than pounds 180m from the funds affected this week. But if you're one of those left, my inclination would be to wait until the picture becomes clearer.