INSTEAD of depositing money with financial institutions, savers should be buying the institutions' shares, says a leading investment manager who admits to making the mistake of being a depositor. In the latest edition of the Irish Brokers Magazine, the head of investments at Friends Provident, Pramit Ghose relates how the deposit income he received from his own building society deposit account fell somewhat short of his expectations:

"Last week I presented my Supergro deposit book to have it updated for two years' interest. On January 13th, 1994 I had £559.52 in the account. Two years' later the balance had grown to £565.87, a total sum after 27 per cent DIRT, of 1.1 per cent over two years or 0.56 per cent per annum. No wonder banks and building societies are making record profits," he says.

Mr Ghose - who is presumably speaking for himself as well - suggests that instead of just leaving their money on deposit with financial institutions, savers should be investing in the shares of the quoted financial institutions .. . either directly or through unit funds. Unit fund managers are keen to attract those savers and have become much more customer focused and have reduced their upfront charges dramatically."

Even equity unit funds (which represent a basket of stocks) have produced far better returns than deposits - in the case of his own company's equity fund it proinduced net (i.e. after charges and tax) returns over the past year of 17.8 per cent and over three and five years of 17.2 and 11.4 per scent respectively, says Mr Ghose.

"The continuing lack of confidence in unit funds in particular means that Ireland is the only country with a sophisticated invest or base which has experienced a contracting unit fund industry while its stockmarket has been booming."