Investing For Growth: Get out of the wasteland

With savings rates falling, it may be time to take a risk. This survey shows how to go for higher returns

NOW THAT interest rates are at 5.5 per cent it is getting harder to take a low-risk approach to your investments. The top savings accounts are paying 6.5 per cent gross (egg, 0845 600 0292) and that includes a 0.5 per cent bonus until the start of next year. If you want to fix your savings at current levels, Hinckley and Rugby BS is offering a five-year bond at 5.75 per cent gross (0800 774499).

Even a Tessa, with its tax-free returns, is only going to give you 7.40 per cent at best, and that's a "teaser" offer from the Skipton Building Society with the rate guaranteed until the end of March (0800 446776). Check the article on page 23 for more about Tessas and how they work. A Tessa is still worthwhile for many taxpayers as this chance to save pounds 9,000 tax free will be lost from April onwards when individual savings accounts (ISAs) replace the current tax-efficient regime of Tessas and PEPs. (For more about how the new ISAs will affect your savings, see page 20.)

With interest rates predicted to be at 5 per cent before the end of 1999 you may want to abandon the building society and opt for something a bit racier. You have less than two months left to take out a PEP and probably feel bewildered by the blizzard of advertising. There's no need to rush your decision but it is worth deciding now whether or not you have enough spare cash to take out a general PEP - you can put in up to pounds 6,000 - and leave this to grow for many years.

Latest research from the unit trust managers' trade body, Autif, suggests only 40 per cent of investors plan to leave their money for more than 10 years (the average is eight years). If you can invest for much longer you will find your returns are better as the main point of taking out a long-term investment is to benefit from the compound growth. As you aren't taking an income from the money you invest, all income and growth from the shares or bonds can be reinvested to increase your savings pool over many years. Before you buy a growth PEP check our feature on page 20.

Shares are the original growth investment, offering you a combination of rising share prices (you hope) and some dividends. A growing number of people want to buy shares themselves to build up a portfolio. The internet has revolutionised share dealing in the US and the UK is likely to follow. You may not have the money, time or interest to follow share prices and deal, but many people find they are hooked once they get started. If you aren't convinced, read our weekly Motley Fool column and visit www.fool.co.uk. The Fools make market commentary interesting to those who aren't impressed by jargon.

Other features in our survey look at some of the more unusual options you may not have considered. Split-capital investment trusts (page 21 ) and venture capital trusts (page 21) sound forbidding concepts, but both are extremely useful for those who have some cash to invest and don't mind taking a lot of risks.