The biggest financial regret for more than half (52%) of UK adults last year was "not saving enough", according to a recent survey by first direct bank.
Many people may be planning to save more this year but they are likely to face a quandary. Interest on most savings accounts is so low that inflation will eat away at the value of their deposits, making this option relatively unattractive, but the outlook for shares and other assets is also uncertain.
Despite poor interest rates, bank and building society accounts will continue to play an important role for short-term savings, according to Richard Wadsworth of independent financial adviser Fitzallan in Glasgow. He does not believe that interest rates will rise to any great extent, if at all, over the coming year so shopping around for the best rates is essential.
Wadsworth likes the Clydesdale Bank's one-year, fixed-term account paying 3.6% gross interest, currently one of the most competitive rates available, while he points out that Tesco and Sainsbury's Bank are paying 2.5% on easy-access savings.
Savers putting money away for the longer term should look to shares and other assets which have the potential to keep up with inflation, even though many observers feel their immediate prospects are not particularly bright.
Jeffrey Deans of Glasgow-based adviser Save & Invest is rather more positive. He says: "I believe the UK stock market will again be volatile but I would predict it can make a positive return in 2012 when dividends are included. However, I would not have much faith in commercial property as the economy looks as though it will struggle for much of the year."
Deans suggests that investors spread their money across a variety of funds. He points out that multi-manager funds such as Jupiter Merlin Income and Cazenove Diversity Income Fund are good starting points.
He says: "They provide an active ongoing management service moving monies across asset classes and picking the best fund managers in each area." Deans also likes Schroder Dynamic Multi Asset Fund and Investec Cautious Managed funds.
Julian Parrott of independent financial adviser Ethical Futures in Edinburgh is not optimistic about the coming year. He believes investment markets will behave in much the same way as they have done in 2011 but argues that this should not stop people investing.
"Despite my gloom, global capitalism is still the main game in town and I think it's more important to be in it and influencing it through socially responsible investments rather than standing on the outside."
For ethically-minded investors, Parrott suggests funds with a well-diversified portfolio and nimble managers. He says: "I continue to like Kames Ethical Equity for UK-based companies and the Ecclesiastical Amity Sterling Bond fund which gives a more flexible and strategic approach to bond investing."
Barry O'Neill, investment director at Carbon Financial in Aberdeen, believes that attempting to forecast financial markets is folly. He says: "There is no foolproof way to predict accurately which asset class will be most or least successful over any 12-month period, so the best chance you have to avoid your portfolio being too adversely affected by the poor performance of any single asset class is to have exposure to multiple asset classes."
O'Neill says trying to time an investment correctly by waiting until share prices are about to rise is also impossible: "Our view is that the best time to invest, provided it's for the long term, is when you have the money.
"Provided you keep costs to a minimum and spread it across asset classes in an appropriate mix to deliver your target return instead of trying to do the investment equivalent of picking the winner of the 3.30pm at Kempton, you should achieve a better return than cash and inflation over the long term."
For investors who prefer a more cautious approach, Wadsworth says there are investment funds which focus on preserving investors' capital and producing absolute returns regardless of market conditions, such as Personal Assets Trust and CF Ruffer Total Return.
He adds: "Another option is the modern-day 'with-profits' equivalent, the Standard Life Global Absolute Return Strategies fund."
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