Personal Finance: We've seen it all before

NOTHING beats a plummeting stock market for a shock headline or three. Panicked dealers, worried old ladies, the threat of meltdown. And then a bounce back. We had it all last week.

Readers who can remember as far back as, er, last summer, will recall something similar: a global crisis, yo-yo markets, the recovery.

But if you ignored the strife and stayed invested in the UK stock market you would have done pretty well out of 1998. A lump sum of pounds 1,000 invested in Legal & General's All-Share tracker fund on 1 January 1998, for instance, was worth pounds 1,139.38 at the end of the year.

Just over 11 per cent (tax free in a PEP) is a good annual return when interest rates are on their way down. By comparison, the average unit trust rose 10 per cent during 1998 and investment trusts went up a rather less exciting 4.5 per cent.

So 1998 ended on an upbeat note but what should the normal, non-finance genius do in apocalyptic 1999? Are shares really a good idea when some City people are telling us we are entering a new type of finance crisis, a global experience that may be unstoppable?

It's disconcerting to watch the markets swing wildly, but even the most cautious must take some chances to generate anything like the amounts of cash we will need for our old age. And that means buying some shares.

Take a deep breath and chant "calm" every time you see some overpaid pundit pontificating from the trading floor. What's the worst-case 1999 scenario? A global meltdown in the financial markets, combined with the Y2K bug shutting down almost every business in the world - and then your microwave packs in.

Face it - if that happens you will have more to worry about than whether or not your PEP is doing well. Hold on to your shares, stock up on baked beans and just hope for the best.

If you have spare cash, you should take a long view and consider buying extra shares. Read our Motley Fool investment column on this page for a unique and irreverent view of the stock market and shares in the news.

Remember you have a pounds 3,000 single-company PEP allowance as well as a pounds 6,000 general PEP, and that right will be lost in April.