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Should British investors put their money in UK or worldwide markets?

I think one of the things that recent events on the stock market have shown us is that you can’t think you can get rid of risk completely by diversifying away from the UK, this time round all markets fell together. But, just being in one market is incredibly risky. The best thing you can do to keep your risk as low as you can, which is not that low, is to invest in as many different markets as you can.

How should investors judge their performance?

Judging your own performance is extremely straightforward; did you make more on your money invested in the stock market than you would have made had you left it in a savings account? If you did you’re winning, if you didn’t you’re not.

Is past performance a good indicator of future success when selecting fund management products?

Past performance is a very bad indicator of future success. In the short term a fund manager can do very well for, say, three, four, five years, but almost inevitably they fall out of the top rankings after a few years. So it’s very hard to know how to choose the right fund manager for your fund. Much better might be to actually forget active fund management at all. There’s a lot of evidence that shows that simply investing in tracker funds, or these days in exchange traded funds, is a much more cost effective way to manage your money.

Are equities no longer guaranteed to out perform lower risk investments?

Equities were never guaranteed to outperform any other kind of investment over any period of time. It’s simply a belief of the last couple of decades that you can’t lose with equities over the long term. We now know that you can, and that means that equities now have to attract a much higher risk premium than they have in the past. We have to recognise the risk and pay less for equities with that in mind.

That’s just my opinion. What do you think? Join in the debate at the Open University.