Heather Connon: Don't fancy shares? Try a little bit of everything

Heather Connon: Don't fancy shares? Try a little bit of everything

Is there anywhere safe to invest your money? It hasn't seemed like it over the past two weeks.

The stock market has managed an occasional rise, but that has generally been followed by a day of falls. And while most fund managers are making predictable comments about shares remaining fundamentally attractive and urging retail investors to be brave, it is hard to have courage when the market is experiencing such savage plunges.

Looking overseas, or to smaller companies, is not a sensible option either. Markets have been tumbling across the world and the riskier emerging markets such as Brazil and China, which started the year among the favourites, have been leading the fall. Small- and medium-sized companies, which have outstripped the global giants over the past three years, are now suffering disproportionately from the change in sentiment.

Commercial property, a favourite among many retail investors over the last year or so, may not be sharing the stock market's travails, and the long-term nature of property deals means it will never experience such sharp swings in value. But when two of the country's biggest landlords, Land Securities and British Land, warn that boom time is over, less experienced investors would do well to take note. Neither is predicting a crash, but the fact that yields have dropped so much in recent years means that a lull, if not a fall, is pretty likely.

Bonds have stood up reasonably well to the recent turbulence,.....continued below

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remaining more or less unmoved as equities plummeted. But given that the jitters in the stock market were sparked by concern about rising inflation causing pressure for interest rate rises - the two things the bond market hates most - there is no guarantee that will continue. And the arguments for both private investors and pension funds having more exposure to commodities is looking a little more threadbare following the severe falls in many of the most hyped metals over the past 10 days or so.

Data on hedge funds are scarce, as they do not have to disclose figures over such short periods. But all five of the hedge funds for which data are available, analysed for The Observer by BestInvest, have done better than the stock market since 12 May, just before the turbulence started, although all but one suffered losses ranging from 0.2 to 3.6 per cent.

The best strategy for survival in the investment world, therefore, is not to pay too much attention to short-term trends. That may be hard for the thousands of investors who finally plucked up courage to go back into the market during the March Isa season, since when the FTSE 100 has dropped by almost 7 per cent. But it also underlines the first lesson of investment: little and often is best. As we counselled back in April, it is better to feed money into the stock market through regular savings schemes than to plunge in with a big lump sum. Anyone doing it this way would have bought fewer shares at the peak, and would be accumulating more shares now as markets are falling.

The second rule is related to this: do not be panicked into buying and selling. Even the professionals would not claim to know when the market has bottomed or reached a short-term high; and research by Fidelity shows that anyone who had invested £3,000 10 years ago would now have £6,418 if they had remained fully invested for the whole period, compared with £4,262 if they had missed out on the 10 best days.