Dip your toe in the stock market for 5PC RETURNS

. . . it really isn’t as tricky as you think

YOU’VE sniffed out the best savings rate for your cash. Almost every penny is sheltered from the taxman’s grasp. But after years of low rates, you ’re still struggling to plug the gaps in your income.

It’s the same story for millions of beleaguered savers.

So where can they turn? F or many, the answer will be taking a little more risk by investing in shares.

Dipping a toe in the stock market may sound scary and complicated, but it really doesn’t have to be.

By investing in shares, you’re simply backing companies you think will do well — and sharing in their success.

And you don’t need to be an expert, either, because there are professionals to pick the shares for you.

All you have to worry about is finding a fund manager who will maximise your returns.

WHY YOU NEED AN INCOME FUND

BEFORE you start, you need to be certain you could stomach losing some of your cash.

Financial advisers typically say you should aim to leave your investments for a minimum of five years (or, ideally, nearer ten) to ride out the bumps in the markets. If you can ’t commit to that, investing is not for you.

The benefit of investing in a fund, rather than individual shares, is that your money is pooled and spread across 50 or more firms. Then if one crashes, you won’t lose nearly as much.

However, not all funds are right for income-seekers.

Some aim only to make money grow quickly, rather than paying out regular sums. Others invest in big companies that pay hefty dividends (the profits firms choose to pay out to shareholders).

These so - called equity income funds are ideal for savers starved of interest, as they typically pay out twice a year.

WHAT TO PICK FOR STEADY PAYOUTS

SOME funds will tell you the returns they aim to deliver . For example, star income fund manager Neil Woodford will next launch a fund that in the first year aims to produce an income of 5p for every £1 invested. That ’s the same as a 5 pc income — or £500 on £10,000.

The first payment will be made at the end of 2018. After that, mr Woodford aims to deliver an income of a fifth more than the yield of the FTSE All Share — a list of around 600 companies on the London Stock exchange. At current rates, that would mean an income of 4.2 pc a year , but this could easily change.

mr Woodford has yet to reveal which shares he’ll buy for the Income Focus fund, except to say many will be UK listed firms.

elsewhere, wealth manager Hargreaves Lansdown has just launched its own fund aiming to pay 3.9 pc. The HL Select UK Income Shares fund invests in 30 companies including Unilever, the company behind marmite and Dove soap, fashion firm Burberry and Guinness-maker Diageo.

The fund also aims for growth, and so will help your pot grow.

RACY DEALS THAT PAY 7 PC A YEAR

OTHER popular funds don ’t set the income they aim to pay.

John monaghan, at investment research firm Square mile, tips the Henderson Global equity Income fund, which is currently paying out around 3.3 pc a year.

more than £20 of every £100 in the fund is invested in computer giants such as American firms microsoft and Cisco and pharma - ceutical firms such as roche, the largest maker of cancer drugs in Switzerland. The fund has handed out £2,330 in income on a £10,000 investment over five years.

mr monaghan also recommends the Schroder Income maximiser fund, which targets a hefty annual yield of 7 pc. It invests in out of favour companies, which can be more risky. He says this is not a

fund for the faint-hearted. More than £3 in every £ 10 is invested in UK financial companies, with HSBC the largest holding. It’s paid £4,053 on £10,000 over five years.

Mark Dampier, of Hargreaves lansdown, recommends the J O Hambro Equity Income fund, which yields around 4.6 pc and has a strong record of increasing payouts each year. As well as oil, financial and mining firms, it invests in smaller companies such as Hollywood Bowl, the tenpin bowling chain. Over five years the fund has paid out £3,190 in income on £10,000.

GET DECADES OF RISING PAYOUTS

YOU could also consider investment trusts. These can deliver a steady income, even in times of crisis, by squirrelling away up to 15 pc of their dividends each year. That means they can top up income in bad years.

It’s allowed some trusts, such as City of london Investment Trust, to pay increasing dividends for 50 consecutive years.

Mr Dampier tips Standard life Equity Income Trust, which yields around 4 pc. Its largest holding is Sage, one of the world’s largest payroll software companies. It has paid out £2,567 on £10,000 over five years.

If at any point you don’t need the income from these funds, you can reinvest the payouts. This means you buy more shares with your dividends, which in turn means your could receive more dividends in future.

If you’re not confident about choosing the investments on your own, get independent advice. You can find a local adviser at

unbiased.co.uk or call 0800 023 6868.