It is rarely sensible to have all your eggs in one basket. Wise investors will spread their money amongst several different kinds of investments. Each investment has its own particular place in a properly constructed portfolio, but how does the investor choose the best balance?

Building society or bank deposit accounts are the automatic choice for many investors as they are safe, dependable and can offer easy access to your money. But remember you are planning for the future and interest rates are variable.

If you withdraw the income each year, even with modest inflation, the ‘real' value of the capital invested in a deposit account is constantly being eroded. While in recent years we have seen relatively low rates of inflation, it is not so long ago that inflation rates were in double figures. Historically, the best method of protecting the purchasing power of capital, over the longer term, has been by investing in areas linked to share markets. Of course, with share based investments you are exposed to risk since share prices can go down as well as up.

Whilst it is impossible to guarantee future growth, stock market investment in the main has generally provided favourable results over the longer term. Shares should, therefore, be considered in any well-diversified investment portfolio.

You can reduce the risk of investing in shares by putting your money into professionally managed funds such as unit trusts and investment bonds. Whilst you cannot eliminate the risk entirely, you can take out investments, which are widely spread both geographically and in different sectors.

Before investing in this area, there are two things you should do:

• Establish your own attitude to risk

• Look medium to long term for this part of your investment portfolio

A Platinum Financial Planning financial adviser will help you strike the right balance.