Investing for growth: Many years from now ...

... your savings could be worth a fortune. Here and on page 21 we examine the options for long-term growth

THE ART of investment is mainly about protecting your capital and getting a good rate of growth. So where do you start? First, make sure that you have enough money for emergencies. Three months' living expenses (your after-tax salary) in an instant access savings account should do it.

Once you have this saved, your next step will depend on your investment aspirations. For example, you may be saving for retirement or university fees for your children. This determines your time frame.

Decide on the amount of risk that you are prepared to take. The greater the risk, the bigger the potential gains or losses.

Graham Bates, an independent financial adviser, says: "Whether you want growth over five years or 20 years, you must ask yourself what amount of risk you are prepared to take to meet your objectives. Basically, risk is all about needing your money at the wrong time."

Many advisers are now warning investors to be more cautious. "Don't be greedy. Markets are going through a turbulent time," says Roddy Kohn, of Kohn Cougar.

"Always remember that if you can get a long-term real return of 5 or 6 per cent above inflation then you will be doing well."

Low-risk investments such as inflation-linked gilts (government bonds) will guarantee your original capital as well as increase its value. Other investments in this category include the normal high-street savings accounts, although the returns after tax are now pretty meagre.

Other useful fixed-interest investments include National Savings certificates and tax-exempt special savings accounts (Tessas).

Many fortunes have been made on the stock market, but nowadays we are all only too aware that share prices can and do go down - although equities are still likely to grow faster over the long term.

Some people like to invest directly in shares (see article on facing page). But if you aren't likely to follow the market closely then you may want to use collective funds.

These funds pool investors' money to offer ready-made portfolios, investing in a large number of different companies and spreading the risk.

Different types of share-based funds carry different degrees of risk.

Now that we are in a period of low inflation, low economic growth and low interest rates, finding the right financial growth strategy means doing your homework or seeking the help of an independent financial adviser (IFA).

what the experts say

IFA Mike MacLeod advises looking at "zeros", which are shares in split-capital investment trusts. They have a guaranteed redemption date and should pay out a fixed amount. You can get more information from IFAs or a stock broker.

IFA Roddy Kohn recommends corporate bond PEP funds.

For the more adventurous, there are plenty of stock market funds available. IFA Graham Bates advises sticking to mainstream funds. He suggests building up a balanced portfolio with realistic growth prospects, with around half the money in the UK, 30 per cent in continental Europe, 10 per cent in the US and the rest in well managed specialist funds such as those investing in technology stocks. He is still advising investors to steer clear of emerging markets.