Self-protection is the best protection for savers and investors balancing risk versus reward in the search for a fruitful home for their money.

The complex mechanisms in place to help guard investments in the myriad of schemes and institutions vying for funds cannot match the best protection of all: vigilance on the part of the consumer.

Anyone with money to invest has a number of decisions to make - against a background of high-profile financial scandals in which investors have lost significant sums of money.

Investors must first consider how much risk they are prepared to take. Do they want security for their capital sum or are they prepared to take the chance that it might fail in return for the possibility of a higher reward?

Investors have to decide how much liquidity they want - will they need to be able to turn their investment into cash quickly? Yet another decision involves tax considerations - do they want an investment that will help to reduce their tax bills?

Investors seeking a return on small to medium sums can choose savings and investment options ranging from deposit accounts with banks, building societies, credit unions and the Post Office, to managed and other investment products offered by life assurance and investment banks.

At the higher risk end of the scale their choices include shares bought through stockbrokers and money put into Business Expansion Schemes and venture capital funds.

Most small- to medium-sized investors opt for a combination of savings or deposit accounts - to ensure some liquidity - plus some form of investment that offers a higher return such as guaranteed bonds or investment in managed funds - usually offered by insurance companies and investment brokers.

A primary consideration for all investors must be the security of the capital they have invested. That will depend on a number of factors including how it is invested, where it is invested and the investor protection provisions covering the agent, intermediary or institution which takes the funds from the investor.

How the money was invested, or to whom it was given, was the issue in some of the high-profile cases where investors lost funds. Losses arose, for example, where investors gave funds to apparent agents or intermediaries for investment in a particular product or institution and the money was never invested on their behalf.

While regulation of the range of individuals and companies operating in the market is improving, a first step for investors seeking to protect themselves is knowing who is entitled to take in deposits and investment funds and who is responsible for regulating these businesses.

Individuals or companies entitled to take in funds from savers and investors range from tied agents and authorised intermediaries to licensed banks, building societies, credit unions and insurance companies.

Tied agents represent the particular financial institution which has appointed the agent to act on its behalf. A deposit or investment placed with a tied agent is fully protected as long as the customer has a receipt for the funds. Customers should be able to recognise a tied agent from the sign on the premises, according to a spokesman for the Irish Building Society Association whose members have about 400 tied agents.

If the customer is in any doubt, the agent should be asked for his/her letter of appointment or the customer could contact the head office of the society to check the agents credentials. Where a tied agent takes in funds and gives the customer a receipt and the funds are subsequently not invested with the institution, the institution will reimburse the customer.

In one recent case customers were alleged to have lost funds where an intermediary authorised to offer mortgages on behalf of a number of institutions was apparently taking in deposits.

For customers, the situation is confusing. But an agent or intermediary doing mortgage business is not necessarily entitled to take in savings and investment funds. Mortgage brokers must have authorisation to carry on their business from the director of consumer affairs, Mr William Fagan. They must display this authorisation which will list for whom they are entitled to act as a mortgage broker.

But this authorisation does not entitle the broker to take in deposits. Any broker or intermediary, other than a tied agent, taking in deposits or investment funds must be authorised by the Central Bank.

The Central Bank keeps a register of authorised investment intermediaries. Potential customers can contact the bank to check if an intermediary is authorised. Customers can further protect themselves by making cheques payable to the institution in which the funds are to be invested rather than the intermediary.

Investors should take steps to ensure that the agents/intermediaries with whom they do business are authorised to take their funds, but there is still no protection for an investor who places funds with an authorised intermediary whose business fails.

The Investor Compensation Bill due to be published within weeks is expected to offer some protection. It is expected to provide for compensation of up to 20,000 ecus (about £15,800).

Savers with deposits in credit institutions authorised by the Central Bank to take deposits are protected to some extent if an institution fails. Under the Deposit Guarantee Scheme the maximum protection is 90 per cent of the aggregate of deposits held by that depositor up to a maximum compensation payment of 15,000 ecus (about £12,000).

For example a depositor with a savings deposit of £4,000 would get compensation of £3,600. A depositor with three deposits of £5,000 each would get the maximum compensation of £12,000. Anyone with £13,333 or more in an account/accounts will get the maximum compensation payment of £12,000.

Deposits are not protected where a money laundering offence is involved or where the depositor has responsibility for or has profited from the failure of the credit institution. The Central Bank must pay the compensation to investors within three months of determining that the credit institution is unable to repay due to its financial condition.

Each financial institution is required to display the notice of this protection for investors in all branches. Depositors should not be at a loss where they are defrauded by a bank or building society employee, for example where money is handed over to an employee at a counter for lodgement in an account and the account is not credited with the lodgement.

Savers with credit unions are covered by the Savings Protection Scheme under which the maximum individual payout is £10,000. In addition there is a bonding arrangement in place covering all credit union employees and voluntary workers whereby customers will be compensated for losses resulting from fraud by a member of staff.

Investors dealing with stockbrokers have some protection under a scheme which offers compensation of up to 20,000 ecus where a stockbroker absconds with money given by customers to buy shares.

At the end of the day there are some mechanisms in place to help protect savers and investors but the best protection of all is vigilence on the part of the consumer.