What should I invest in?

About 19 months ago I took out a stocks and shares ISA. I am currently paying in £100 per month. In July of this year, I was informed that it was worth only £1,440. I intend to keep this going for at least another 3 years and I would like to get back at least what I have paid in. Is this possible, given the current state of the stock market or would I be better changing to a cash ISA? John Burns

All investors need to make sure that they have an investment objective before they invest their money and ideally you should discuss this with an independent advisor.

Once a strategy is established it is important that the portfolio is reviewed at least annually to make sure that what has been agreed is still relevant, in case your circumstances have changed.

It goes without saying that you need to ensure that you have a diversified portfolio but you should also ensure that the money is invested in a tax efficient manner and all relevant allowances are being used.

For example, it would be possible for a married couple to invest £300,000, withdraw £21,000 per annum and assuming a 7% return, there is not going to be a tax liability on the withdrawals if they are taken as capital.

If you compare this to an investment that pays a dividend which for a high rate tax payer would leave £12,600 pa not £21,000 you can clearly see the importance of the using your CGT allowance.

There are a couple of investments that currently look interesting.

The more adventurous may wish to look at Zero Dividend Preference shares (zeros) which have fallen as a sector over the last year by over 48% (source S&P Micropal bid to bid 3/9/01 to 9/9/02) so you are buying into a sector that is not being looked at by most investors and sentiment towards this sector is very poor.

Given the recent falls in the equity market a number of zeros have now become geared into the movement of the stock market so if we do see a rally zeros should perform well.

There are a number of funds that invest in zeros and this would be a good way to get exposure to this asset class.

However, remember that if the equity market suffers another fall zeros will also go down.

The attraction of buying zeros now is that you are being a contrarian investor which is a stance that often pays handsome returns for those brave enough.

Another interesting investment for the more cautious is to consider structured products as opposed to investing in fixed interest.

There is a likelihood that interest rates are going to rise over the next 12 to 18 months and this will reduce the capital value of fixed interest investments.

While it is possible to get a higher return in corporate bonds than gilts you are then exposed to the risk of default or a further deterioration in sentiment, both of which could reduce the capital value.

However, if you buy a structured fund it is possible to get your capital returned and at the same time have exposure to the equity market.

So if the market falls all you have lost is the interest that you would have earned on having the money in the bank - but if the market rises you will be able to capture a proportion of the rise in the equity market.

Jonathan Fry, managing director, Premier Asset Management

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.