Top ten tips for investing during the recession

With speculation rife over the state of the economy, knowing where to invest your hard earned cash can seem like an uphill struggle. Whether you have a positive outlook and see green shoots of recovery or you have a more cautious view, Unbiased.co.uk, the professional advice website, brings you ten top tips for where best to invest your money in the current market.

1. Jason Witcombe, Evolve Financial Planning

"Remember that investment charges are an expenditure item just like any other. In fact, they can also be one of your biggest! For example, you may be paying a typical annual management fee of 1.5% per annum or above for your portfolio, however, most index tracking funds charge well under 1% per annum and if independent research is to be believed, perform better in the long run. Therefore, moving to an index tracking approach can slash the cost of investment and increase your returns at the same time."

2. Danny Cox, Hargreaves Lansdown

"The repayment of debt is the best investment you can ever make. The recession means less job opportunities, wage cuts, and rising unemployment - and in order to protect yourself, it is wise to repair your personal balance sheet. Reduce your spending and use the money you save to reduce personal debt first (credit cards, overdrafts, store cards, loans) then your mortgage(s). Build a cash cushion to help meet unexpected bills or to cover expenditure if your income reduces or falls. A mini cash ISA is the ideal tax free savings account to start with. Up to £3,600 can be saved into this per tax year and for those aged 50 or over on the 6th October 2009, the limit is £5,100."

3. Chris Wicks, N-Trust Limited

"Try not be swayed by media hype and remember the basics of investment. Assess how much risk you want to take, take into account how long you wish to invest for and apply an asset allocation (split between equities and fixed interest) appropriate to your risk profile and term of investment. Choose low cost funds which are adequately diversified (to reduce risk) and rebalance periodically to ensure that the correct risk profile is maintained. Be wary of products purporting to offer guaranteed returns as these may not be what they seem and always keep a reasonable cash reserve."

4. Kevin Tooze, Equity Partners UK Ltd

"Retail Structured Products have come back into the market and taken millions of pounds due to their moderate risk and high returns. Contracts are often 3 to 6 years long and only require the FTSE 100 to be at the same level or higher one year later for you to receive your capital back and a high coupon ranging from 8 to 12%. Many of these plans gains are subject to CGT so the new allowance of £10,100 pa and the reduced rate of 18% thereafter is not to be missed."

5. Adrian Lowcock, Bestinvest (Brokers) Ltd

"Always take advantage of tax breaks. Don't erode your returns by allowing inefficient taxation on your gains. Tax relief on pensions boosts funds immediately. Make sure you use your ISA allowance or you lose it. Try and take a long view and don't be swept away by media noise surrounding the economy. We will recover from the recession and stock markets will rise. For those who are well-positioned, opportunities will arise to pick up assets at great value."

6. Duncan Glassey, Wealthflow LLP

"A diversified approach has made sense in the past; makes sense today and will continue to make sense in the future. Broadly diversifying a portfolio minimises the risk of owning any single shareholding. Successful recessionary investing is not about finding the next ‘Microsoft'. Don't be enticed into thinking you can easily get rich quick. Focus on the less glamorous concept of diversification. Overconfidence and under-diversification does not serve investors well."

7. Simon Gibson, Atkinson Bolton Consulting

"Equities in the UK and overseas are now probably, on the whole, fair value, if not cheap. The question is what to buy. One needs to hedge the portfolio against inflation, which, though months and possibly as long as 2 to 3 years away to any extent, will come back and bare its teeth. In the UK but perhaps especially overseas one needs to invest in companies that do not rely on high leverage to prosper, and where the drive towards a sustainable world will see profits, so the themes of water, pollution, carbon credits, renewable energies and population (including pharmaceuticals and biotechnology) should be to the fore."

8. Gordon Bowden, Quainton Hills Financial Planning Ltd

"Remember that investment is as much about scepticism as it is about identifying opportunities. Never invest in anything that you do not understand. Even before investing, consider how you will realise your investment in the future when you want or need to. Ask yourself why someone would be willing to pay more for your asset in the future compared to the cost at which you are investing. These principles apply equally in a recession or in a boom."

9. Mr Mel Kenny, Radcliffe & Newlands

"Remember we are in a balance sheet recession - banks won't lend to you on the terms required and nor are consumers looking to borrow in droves. The Government too is suffering. In this environment the aim is to debt minimise rather than profit maximise. Debt minimisation favours investment funds with a bias towards non-cyclical stocks such as utilities, telecommunications, pharmaceuticals and tobacco. These are resilient stocks that remain in demand no matter the economic climate and provide the most reliable dividend."

10. John Lang, Tower Hill Associates Limited

"Rather than speculating on which funds are best to invest in during - or as we come out of - a recession consumers should spread their risk by investing in different asset classes (i.e. equities, property, commodities, bonds and cash). This not only creates a "portfolio for all seasons" but also one which gives the client the best chance of achieving their short, medium and long term financial objectives. With a client centric asset allocation in place the important task of selecting the right funds can begin with low tracking error/low charging Index or Exchange Traded Funds (ETFs) our preference as they reduce the cost drag on investment performance. Finally, if timing the markets is of concern then "drip feeding" money back in over the next 6 to 12 months may be a practical solution albeit a costly one if market sentiment improves in the short term."

David Elms, Chief Executive of Unbiased.co.uk, comments: "As conflicting reports on the state of the global economy continue, knowing what to do with your money can seem daunting. An independent financial adviser is best placed to assist you with your financial planning. An IFA can work with you to develop an appropriate investment strategy and review your plan to ensure that you remain on track and decisions are made with focus and cohesion."