Many IFAs believe investors are again keen to invest in high-risk funds.The last three years have. by and large, been good times for investors in the more dangerous side of the stockmarket. High-risk funds such as emerging markets, including India, Russia and China, and commodity funds have delivered lucrative returns. However, the market correction in May saw many investors switch to the property market or similar investments. Credit Suisse co-head of multi-manager Gary Potter says: “There was a rise in people’s attitude to risk in May and June in emerging markets and higher-octane areas. Volatility increased and risk was taken off the table pretty quickly. “Concerns have reduced again. Not all markets are back to pre-correction levels but they are not far off.” Hargreaves Lansdown head of research Mark Dampier says: “The correction in May was well signposted. Emerg-ing markets fell by 25 per cent but funds like India have risen by about 30 per cent since then.” He says investment in high-risk funds is fairly constant, commenting: “Investors want it all when the market is going up and nothing when it is going down. “Investors all want a punt in something. They piled into Russia, China, India, they like that story, it catches the imagination. They like a bit in a sex and violence fund but they usually come in after the sex and just get the violence.” Potter believes that most investors tend to invest only in funds with a proven track-record. He says: “Most investors wait until a fund has gone up 75 per cent and then buy.” But he also that notes in the past three years this method has “not necess- arily been daft.” BestInvest head of commu-nications Justin Modray says: “People are piling into commodity funds. It makes sense but they are generally buying because these funds are the top-performing ones. They do not realise how risky they are.” Potter is concerned that investors are getting carried away in the success of these markets. He says factors such as a slowing economy in late 2007 and unpredictable inflation mean that people should tread more carefully. He says: “The level of complacency is unhealthy in the short term. I am not suggesting a crash, just to be a little bit careful. The consequences of a slowing economy and an increase in prices in China mean that companies’ profits will slow. Volatility is down near its historical low. People think everything in the garden is rosy but nearing autumn and winter, any new shoots might be killed off by early frost.” Some IFAs are also concerned that some low-risk funds are becoming overpriced and could potentially be as dangerous as high-risk investments. Dampier says: “Looking through the bubble area at commercial property, this will be the third year of double-digit returns and I think it is well and truly overpriced. Sometimes, low- risk investments have the highest risks. Everyone und-erstands high risk but low risk can be dangerous too.” Personal debt in the UK hit £1237bn in July, up by 10.5 per cent in 12 months according to Credit Action statistics. Average household debt is £50,091 if you include mortgages and the average adult owes around £26,313. But IFAs say debts have not affected investors’ attitude to risk. Modray says: “As long as house prices look buoyant, homeowners are not bothered about their debts. The big threat is if house prices start to slide. If they did, people would become much more risk-averse.” But there is a significant chunk of the population who have not dabbled in risky investment since they were hit by the technology crash and many have stopped investing altogether. Plan Invest IFA Michael Owen says a lot of people are still very cautious. He says: “These investors’ appetites for risk in very high risk markets have decreased. They are not going over the top in the riskier areas of emerging markets or hedge funds. But are primarily content to invest in the home market and property.” Dampier says a whole generation of people now shy away from investing in riskier funds because their first investing experience was disastrous. “If you get into a car for the first time and wrote off the car, you would not be too keen to get back in. It is important for a beginner to get off to a good start. It is the same in sport but especially true with investment,” he says.