Which fund should I choose?

Like any form of investment, funds delivering the greatest capital growth will involve a fair degree of risk and the suitability of a particular growth fund will depend very much on why you are investing.

If, for example you are investing to build up a lump sum to repay your mortgage or pay for your children's education, you ought to concentrate on funds focused on mainstream, lower risk investments such as blue-chip shares or unit trusts that have some gilts in their portfolio. If you fall into this category, you should probably confine your search to the UK equity growth sector and plump for broad-based funds.

But if you have no specific purpose for investing and can afford to be more adventurous, a move into funds which invest in smaller companies, technology and the internet, or overseas and emerging markets could be more rewarding.

For example, in spite of recent hiccups, performance data for the last 40 years suggest that over most time periods, smaller companies outperform their bigger brothers by more than 4% per annum.

Little wonder then that around 125 unit trusts and more than 60 investment trusts have a small company focus. The fortunes of smaller companies are, however, very much tied to the economic cycle, so investors should be prepared for a rocky ride.