Once you've determined a sound reason for putting your money into an investment fund, it's time to work out what to go for - and that all depends on your attitude to risk.  Most of us know what kind of personal character we have, but our relationship with money can be very different.

Much will depend on your age and what you want the money for – if you're in you're early 20s (you lucky thing) and simply putting money into a unit trust to build up some long-term savings, then you can afford to take a punt with all sorts of higher-risk funds. 

This is because, with all the time that your money is likely to be invested in the market, it will be able to ride out the ups and downs of various economic cycles. 

So, whether it's a fund investing in Korea, Russia or even Africa, you can be comfortable in being able to take on the added risk.  

However, if you're in your late 50s and want to put a lump sum into a fund so that it will pay out a steady annual income when you reach 65, then it will make much more sense to pick an "equity income" fund that invests in solid UK blue-chip companies. 

These, of course, are stereotypes, but they serve a valuable purpose: the stock market is there to suit you and work for your investment targets. In theory, at least, it is there to serve your needs, not the other way round. 

You'll probably be one of the millions who fall between these two character types, perhaps a touch cautious about losing money in a fund but also keen to pick something that might surprise you with its performance. One thing is sure, though, you'll want it to be a winner compared to its peers. 

A 'cautious balanced' fund or FTSE-100 tracker fund are decent places to start, because they allow you to get a sound idea of the companies in which they invest – again, like equity income funds, mainstream UK corporate giants whose products you might buy or whose services you use.

Rather than investing in a single fund, though, the idea is that, over time, you will be able to build a small investment fund portfolio in line with your means. 

As the maxim dictates, putting all your eggs in one basket – even a very secure one, such as a UK tracker – can have adverse consequences, such as following the FTSE-100 down on a vertiginous drop. 

For the riskier investor, sticking to a single fund carries an extra dimension of danger. The nature of economies in countries like Russia and China is that currency difficulties or even political struggles can - in the twinkling of an eye - have a massive, sudden impact on the country, and the money in your fund. 

To this end, it's far better to spread your money across two or even three funds over time. Not everyone will be able to do so but – in terms of protecting yourself against a ruinous loss of your cash - it'll spread your risk to a much more acceptable level.

So, for example, you could assemble a portfolio consisting of £500 in each of the following: a UK FTSE-100 tracker; a fund investing in Europe; a China and India fund; and a corporate bond unit trust. That covers a spectrum of risk profiles and should protect you from potential disaster in one investment and help you with potential profits in another. 

It doesn't have to be shares, either; your fund can invest in bonds or gilts (much lower risk than shares) or even OTHER funds. These latter funds are called - in a not-too-snazzy name - 'multi-manager' funds, and they spread your risk even more widely. Watch out, though: they carry higher charges that can eat into your returns.

To scour a full list of all different types of funds and their risk profile, try www.trustnet.com; www.bestinvest.co.uk; or www.h-l.co.uk.  

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