By Jon Hitchin of Hargreave Hale Ltd

THE last 12 months have been horrific for equities around the world, particularly those in the technology and telecoms sectors.

The newspapers have been full of gloom and doom and things have gone from bad to worse.

At present, few would predict that a recovery is just around the corner.

In an attempt to kick-start the economy, the Monetary Policy Committee has already reduced interest rates several times this year. However the downside of this is that savings rates are now at their lowest levels for many years.

Therefore, if you are nervous of the stock market but disappointed by the rates of return from your building society account, where should you put your money?

Increasing numbers of investors are turning to the fixed interest market, largely made up of corporate bonds and preference shares.

Fixed interest stocks not only offer an income in excess of most deposit accounts but also offer relative capital security with the prospect of capital growth.

The corporate bond market has grown significantly in the last few years. The growth has mainly been due to the higher income paid out compared to gilts but also due to the fact that it has been possible to buy bonds within Peps (and now Isas) since the mid 1990s.

The tax treatment of bonds is also advantageous when buying within an Isa or a Pep -- with corporate bonds all income is tax-free, whereas income from equities qualifies for a 10 per cent tax credit and this is due to disappear in 2004 if no changes are made to the tax rules.