Financial investment refers to putting aside a fixed amount of money and expecting some kind of gain out of it within a stipulated time frame.
Bonds are in "bubble" territory, the critics say, and equities, even after recent falls, are expensive. Deposit accounts at banks, meanwhile, pay miserable interest. Is commercial property, still 40% below its 2007 peak and paying a yield of around 5% a year, the better option?
Small investors can choose from a number of property funds, most which can be put in a tax-free Isa. Their promoters claim they pay a much better annual income than bank accounts, yet also offer a decent chance of future capital gains.
But let's be clear: these funds do not invest in residential or private rental property, focusing instead on office blocks, retail centres, industrial premises and even GP surgeries.
The risks, as anyone who bought just before the last bubble burst in 2007 knows to their cost, are numerous. You can buy and sell shares in BP, Glaxo or HSBC in a millisecond, but it can take years to sell an office block, and during the post-2007 collapse investors were simply told they couldn't withdraw their money. The word "liquidity" takes on a crucial meaning in property funds.
But big money managers have recently begun shifting their private clients into commercial property. Investec Wealth & Investment, a leading private money manager, is moving £500m of its investors' cash into commercial property.
Chris Hills, chief investment officer at IWI, says: "We are sending a clear signal to clients that at a time of rising asset prices, commercial property represents a pocket of value they should be investing in. Capital values outside London have hardly recovered from the lows of 2009 … We believe some of the money going into London in the past few years will extend into the UK's regions as confidence in our economic recovery increases."
But other financial advisers are more cautious. Brian Dennehy of Dennehy Weller & Co says: "It is difficult to see how the market will push yields or capital values much higher."
If commercial property does appeal, small investors first have to choose between "bricks and mortar" funds and "property shares" funds.
The funds investing in the quoted shares of the major property companies, such as British Land and Land Securities, act more in line with the general stock market; the bricks and mortar funds use money raised to buy physical buildings, and in a downturn can have liquidity problems.
To complicate matters, investors have to choose between Reits (real estate investment trusts), which are more like individual shares and quite volatile; property unit trusts, which have a wide basket of investments; and conventional investment trusts, which have lower costs and can "gear up", but also suffer from "discounts" where the price of the trust is lower than the assets in which it has invested.
Bricks and mortar funds
The biggies are run by M&G and Henderson, with F&C a relatively new entrant. The M&G Property Portfolio has £2.2bn under management, and a minimum investment of just £500.
Richard Gwilliam, head of research at M&G Real Estate, says commercial property had a poor 2012, "reflecting general concern over the prolonged repair and rebalancing of the occupational market", but that this year there are tentative signs of a recovery. "The provinces, where average rents have been continuously falling since mid-2008, are likely to see ongoing decline until 2014," he warns.
Guy Glover, manager of F&C UK Property, is more optimistic. "There has been a significant change in sentiment in the commercial property market in the last few months. In value terms it fell by 44% in 2007-08 and was still reversing in 2009, but we are now expecting things to turn positive. We may be at an inflexion point."
His fund is mostly invested outside London – for example, it owns the Carpetright building in Tunbridge Wells, Homebase in East Grinstead, and Adelphi House in Reading, whose tenants include the local jobcentre. He is confident investors will be able to enjoy yields of around 5% a year going forward, plus some capital growth.
Aberdeen Property Share is the best performer among the unit trusts, with a return of 58% over the past three years. It is mostly UK focused and is a big holder of shares in Derwent London, which has lots of office and retail sites around the Crossrail stations opening in the capital.
But investors are not limited to the London office market. The £720m TR Property investment trust takes a pan-European approach, and its biggest holding is Unibail of France, the continent's biggest real estate company. TR's share price has risen from £1.50 to £2 over the past year.
It is managed by Marcus Phayre-Mudge, who says the key to investing in European property is to stick to the core of major northern cities: London, Paris and the "big six" German cities are his favoured destinations.
Does he have concerns about London's high crane count? "It does feel like there are a large number of cranes on London's skyline. But in King's Cross, much of it is for Google, while Aon has agreed to occupy half of the Cheesegrater. A lot of the cranes aren't for offices but for Crossrail. There is almost no speculative finance around, so almost no speculative development. The banks are just not lending."
It is that fact that may provide most reassurance to potential investors. The last commercial property boom and bust was financed by reckless lending by banks, especially in Ireland and Spain. Although no one wants to say "it is different this time", most fund managers are quietly confident that the worst is over, and that safer, steadier returns are likely in the coming years.
Shares in fashion retailer Ted Baker have reached a record high after international expansion drove a better than expected spring performance.
The company said sales increased by 32.7% in the 20 weeks to 15 June compared with the same period last year, with both retail sales and wholesale business growing. Ted Baker has grown its international footprint since the start of the year by opening concessions in France, Spain, the Netherlands and Tokyo alongside shops in Shanghai, Adelaide, Beirut and Kuwait.
Founder and chief executive Ray Kelvin said: "We are continuing to invest in developing the Ted Baker brand internationally and have been encouraged by the reaction to the brand and the collections in our new markets."
The scale of the sales increase appeared to take the City by surprise, with shares soaring 16%, closing up 230p at a record high of £17. Shares in the company have risen 63% in the last year.
In the UK, the company is reviewing its store portfolio. It has closed the Kings Road store in London and moved its Stansted Airport store to Gatwick as the airport is being redeveloped.
Meanwhile, electrical retailer Dixons, owner of Currys and PC World, saw its UK business return to growth for the first time in several years, as sales rose 7% in the year to 30 April. The company said it was on the road from "survivor to winner" as it benefited from the boom in tablet sales and gained market share following the collapse of its rival Comet.
The chief executive, Seb James, claimed that half of the company's growth had come from winning customers from Comet. He added that sales of tablet computers will keep climbing. "There's lots of road left in this particular product. Less than a third of UK households now have a tablet. And there's going to be some further product innovation as these tablets get thinner and lighter and more powerful."
The most popular lines are the Apple iPad, the Samsung Galaxy and the Google Nexus.
Underlying profit rose 15% to £94.5m, although that swung to a loss of £115.3monce the impact of restructuring its troubled European online business Pixmania was included. Analysts said Pixmania lost £31m and the retailer's southern European stores lost £24m.
Dixons ended the year with £42.1m of net cash, having started it with £104m of net debt. James said the return to a cash-positive position had come a year earlier than expected.
He added: "That's a big milestone for a business where we were constantly asked how we were going to survive."
James also revealed the company has appointed advisors to look at offloading Pixmania.
Inflation rose to 2.7% in May, meaning savers face a struggle to protect the value of their money from being eroded. To match inflation, a basic rate taxpayer needs to find a savings account paying 3.38% a year, while those on a higher rate need an interest rate of at least 4.5%. And the bad news is that not a single standard savings account delivers big enough returns. Even if you do not pay tax, you will struggle to beat inflation: a five-year fixed-rate bond from First Save (paying 2.9%) is about your only option. So what can hard-pressed savers do with their cash?
Here are some options if you want to maximise your returns – but bear in mind if you are a taxpayer that not all of these beat the current rate of inflation.
Regular savings accounts
Some regular savings accounts offer a rate that works out above inflation before tax – but they are only available to customers of the banks offering them. First Direct's Regular Saver Account pays 6% AER on monthly deposits of £25 to £300 made over 12 months, while HSBC pays the same to Premier and Advance customers, and 4% to other account holders.
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Remember that only the cash deposited on day one will earn the full 6%, so if you saved £300 a month into First Direct's account for 12 months you would get back £117 before tax, a return of 3.25% (2.6% after basic rate tax). Still above inflation, but not as stunning as it might first appear.
Norwich & Peterborough's Gold Savings Account pays 5%, which does not beat inflation over the year, and this is also just for current account customers. Deposits of between £20 and £250 a month are accepted.
These accounts are good if you can commit to saving a sum each month, but to withdraw money early you will have to close the account and the amount of interest will be reduced to the rate made on the banks' standard accounts. The maximum amount you can hold is less than your Isa allowance.
Elsewhere, rates on regular savings accounts are dire – at Lloyds TSB, for example, you get just 2% – less than the bank offers on some current account balances.
While most current accounts offer no, or very little, interest to customers in credit, some do – and the rates can be better than the same provider offers on its savings accounts. Take Lloyds TSB, for instance. It pays up to 3% on credit balances in Vantage accounts – you need to be holding between £3,000 and £5,000 and to pay in at least £1,000 a month - while its best rate for adult savers is 1.9% on a two-year fixed-rate Isa.
Santander's 123 account offers a rate of 3% on balances between £3,000 and £20,000, plus cashback of up to 3% on a range of purchases. There's a monthly fee of £2 and you need to pay in at least £500 a month.
Nationwide's FlexDirect pays a hefty 5% on balances up to £2,500 if you pay in at least £1,000 each month. Its FlexPlus account pays 3% and has a £10-a-month fee.
To get the advertised rate you will usually need to make the current account your main account and pay in a set amount each month. Some savers will also be uncomfortable with keeping their savings in an account which they can easily access, particularly one where they can dip into them without even realising it if they use their debit card.
The most "alternative" alternative to savings accounts is becoming increasingly popular. These online operations allow you to generate a return by depositing money which is then made available to borrowers. They are like an old-fashioned bank, but with fewer layers between you and the person accessing your cash. There is a fee, which is deducted from your interest.
Zopa is probably the best known and has been operating for eight years. It advertises a return of 4.7% after fees for savings held for five years but the rate you actually get will depend on how much risk you are willing to take, as well as the timeframe of your investment.
RateSetter is one of the alternatives. At the moment you can get a return of up to 5.2% if you are willing to commit your money for five years. A three-year commitment can earn up to 3.9%, while lower rates are available over a month and a year.
With all of these providers, there are risks: that the borrower will default, and that the company will go bust. The former is being addressed through schemes like Zopa's Safeguard and RateSetter's Provision Fund, which shield lenders from bad debt. The latter is a potential problem as deposits lent through peer-to-peer lenders are not covered by the Financial Services Compensation Scheme (FSCS). (RateSetter does offer FSCS protection for money that has not yet be passed to borrowers.)
Another, more minor, issue is that savers will need to declare their income and pay tax directly to HMRC as none of the peer-to-peer lenders deducts tax before paying interest.
Stocks and shares
You could seek a return by putting your money in the stock market. If it's income you're after, instead of earning interest, you could look for funds that pay dividends. Patrick Connolly of IFA group Chase de Vere says UK Equity Income funds can do the job: "These often invest in large companies that are making consistent profits and paying dividends to shareholders."
Some are offering returns above inflation – he suggests investors consider Threadneedle UK Equity Income (currently yielding 3.5%), Invesco Perpetual High Income (3.2%), Artemis Income (4.0%) and the Schroder Income Maximiser fund (5.8%). "However, investors shouldn't focus solely on those funds paying the most income as this could come at the expense of capital growth," he says.
Connolly says anyone seeking income should also hold money in fixed interest investments. "It can be difficult to invest in the perceived safest forms of fixed interest, such as gilts, and still yield more than the rate of inflation," he says. "Fixed interest funds which invest only in high yield bonds can be expected to consistently yield much more, although there is greater risk to investors' underlying capital." His preferred option is strategic bond funds, and he suggests Henderson Strategic Bond (5.6%) and Jupiter Strategic Bond (5.2%).
Commercial property funds are another option as the rents being paid provide an income to investors.
The downside of stocks and shares is that your money is not protected – funds are less volatile than individual shares but you can still lose money if the fund manager makes the wrong call or the markets crash. Read Patrick Collinson's guide to starting investment for more guidance.
Connolly says: "The best approach to beat inflation, and to protect underlying capital, is to hold a diversified investment portfolio containing cash, equities, fixed interest and property.
"However, even by spreading risks, investors must accept that the value of their money can fall in absolute and real terms."
Britain's best-known fund manager, Anthony Bolton of Fidelity, is to retire next year with his reputation as a legendary investor "tarnished" by the relative failure of his £460m China fund.
Bolton, 63, will step down in April 2014 and be replaced by Dale Nicholls, currently manager of Fidelity's Pacific funds.
Known as the kingmaker in several multibillion pound City deals, Bolton shot to fame in 2003 when he orchestrated the sacking of Michael Green, then chief executive of Carlton Communications, earning him a title he loathes: the Quiet Assassin.
He became the most successful investor of his generation, with his Special Situations fund earning a huge and loyal following among small investors. But his China Special Situations fund, which raised £460m amid huge fanfare in 2010, has failed to repeat that success.
Nearly 100,000 investors who bought at £1 a share – and saw some of that go to financial advisers in a much-criticised commission deal – are still nursing losses of 14% three years later, with the trust currently trading at 86p a share.
In April 2010 Bolton hailed China as the "investment opportunity of the next decade" but the performance of the country's stock market has been poor almost ever since. The China fund sector is the worst performing of all sectors in the past three years, registering a loss of 0.6%. This compares, for example, with gains of 40% for UK equity funds, 39% for US equities and 35% for European equities. "Worse still is that Bolton's trust has significantly under-performed many other Chinese funds," said Patrick Connolly of advisers Chase de Vere, adding "we never recommended it to our clients."
Last year Bolton said he would extend his time in Hong Kong in a bid to reverse the losses suffered by small investors in his trust. In recent months, the performance of the trust has improved, rising from a low of 71p in September 2012 and even touched its launch price of 100p before falling back again as markets worldwide have dipped.
After his retirement in April 2014, Bolton will continue as an adviser to Fidelity and a trustee of its charitable foundations.
Mark Dampier, head of investment research at Hargreaves Lansdown, which was among the promoters of the fund, said: "Anthony has had a fantastic career; he is rightly regarded as one of the best active managers of recent decades. His China fund's performance in recent years has tarnished this record slightly, though it has shown signs of recovery in the past year."
Little is known of Bolton's own personal fortune. As an employee, he has shared in the income stream from the funds, which in the case of the China fund is worth around £5-6m a year. But his personal wealth is much greater, and tied up in his holdings of 'career shares' in the group. Fidelity is a privately held company, still effectively controlled by the Johnson family, who founded the firm in the US in 1949. Bolton joined Fidelity's UK operation in 1979, and was among the few senior managers to be invited to buy shares in the company, which will now be worth many millions of pounds. These do not vest in their entirety until the senior manager departs.