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Regular savings
Seasoned stock market investors do not need to be reminded that shares do not offer a one-way ticket to riches. Black Wednesday, the Asian slowdown of the late 1990s, the dotcom bubble and more recently the collapse of nearly all major economies into recession have all taken their toll on shares.
Take a punt or cash in?
Each year, investors have to decide once again whether to invest money into the stock market or miss out on tax advantages. They have until April 5 to use up their Isa allowance or lose out.
If you can take the rough with the smooth you should make money as long as you are prepared to invest for at least five years - the longer the better - and pick your fund carefully. But there are no guarantees.
Stock markets tend to rise over the longer term but can yo-yo all over the place on the way. The FTSE 100 index, which measures the performance of the largest UK companies presently stands at around 6,500 points, but five years ago it was just 4,300.
Annual returns chopped
However, experts believe investing a lump sum is a better bet than putting your money in gradually.
Warren Perry from independent financial adviser (IFA) Whitechurch Securities say: "If you think the market will do well then you should get a better result by putting in a lump sum now."
Research by fund management group Fidelity Investments backs this theory. It found that if you missed out on the best 40 days market performance between the end of 1987 and 2001, you would have seen annual returns chopped from 12.1 per cent to just 3.7 per cent.
If you are nervous you can open your Isa this tax year and phase your money into shares later through schemes run by independent financial advisers such as Hargreaves Lansdown or fund managers Fidelity and Henderson.
Drip, drip, drip
If you don't have a lump sum you can build up capital with regular savings.
"A regular savings approach could also suit lump sum investors looking to invest in volatile risky markets such as technology or the Far East," says Patrick Connolly of IFA Chartwell Investment.
You can invest in funds for as little as £25 or £50 a month.
International outlook
The advantage of regular savings when markets are volatile is that you buy more shares or units when prices are low and fewer when they are expensive for your fixed monthly sum, bringing down the average price of each share or unit.
Investment trusts offer cheaper regular savings plans than unit trusts but their performance can be more volatile.
Keep an eye on how your fund is doing. You can switch to a new fund in the years ahead to widen your investments.
Contacts:
Autif - the Association of Unit Trusts and Investment Funds (020 8207 1361 or www.investmentfunds.org.uk) and the Association of Investment Trust Companies , or www.itsonline.co.uk, both have fact sheets on regular savings plans.
