Five warning signs to look for in a fund

1. Three years of underperformance

Alarm bells should ring if a fund has consistently underperformed in its sector over recent years.

2. Erratic performance

One year the fund makes 50%, the next year it's down by a similar amount. This might be down to market conditions, but you need to investigate.

3. High manager turnover

If the fund has been run by a number of different individuals over the past 10 years it suggests a lack of consistency in the management team.

4. The fund becoming too large

If a fund becomes very large it may become unwieldy and difficult for the manager to invest or switch holdings.

5. High gearing on investment trusts

If a trust is highly geared (has borrowed a lot) investors are more vulnerable to big losses if the market falls. It's safer to chose a trust with little or no gearing.