A bear market spells bad news for any investor and particularly the vulnerable private investor. This type of market can be defined as one that suffers declining share values and a decreasing rate of economic growth - both features that the Republic is currently experiencing.

Add in high inflation and a low rate of interest and you have a serious dilemma for the small investor: where do you put your money so that it will grow rather than lose value? Keeping your money in short-term deposits in the current inflationary environment means you are achieving negative growth rates - in other words, your funds are shrinking.

So what can you do? The first question to ask yourself is: how much risk are you willing to take to achieve growth? If you want to play it safe, you will want to keep your cash liquid rather than invest in assets.

The problem is short-term rates on small deposits are currently less than 1 per cent in some of the major banks and with inflation averaging 5 per cent per year, you are losing badly. Currently the best rate of interest on deposits is from Northern Rock, a British financial house. It pays the equivalent of the European base rate on funds. You can put in as little as £1,000 (€1,270) and your money is available on demand. Northern Rock is the seventh-largest deposit taker in Britain and it has a small outlet in Dublin. Transactions are done over the phone or by post.

The European Central Bank rate is currently 4.75 per cent. Subtract 20 per cent for DIRT and that nets you 3.8 per cent on your money.

Bank of Scotland is offering 4.2 per cent on one-month deposits and 4.15 per cent on weekly deposits. It does not offer daily rates. Call or demand deposits with AIB and Bank of Ireland earn 1 per cent and 0.9 per cent respectively. Both banks offer better rates on term deposits but the rates are still well below the inflation rate.

AIB's seven-day notice deposits yields 1.87 per cent for amounts less than £50,000 and 3.2 per cent for more than £50,000. Its 30-day notice deposit earns 3 per cent for sums less than £50,000 and 3.95 per cent for £50,000 plus. Bank of Ireland's reserve deposit for amounts up to £5,000 yields 2.55 per cent, and 3.05 per cent for amounts between £5,000 and £100,000. You are allowed one withdrawal per month without notice. Bank of Ireland's 30-day high-yield account offers 4 per cent on deposits between £3,000 and £15,000. However, even with the highest rate available, you are still into negative returns, with inflation averaging 5 per cent. Your money is wasting away.

To get better rates of return you will take on varying elements of risk. A low-risk option can be characterised as one with limited exposure to the volatility of asset values. There are a number of options out there. Mr Eddie Hobbs, financial adviser with FDM, recommends two with-profits bonds as reasonable options in this category.

Standard Life, the largest mutual in the EU, set up a with-profits bond in mid-March, which is interesting because 87 per cent of the assets are invested in equities. Standard Life is one of seven life offices in the world that has a triple A credit rating. That allows it to keep a very high proportion of its money in equities. The life office will smooth out the ups and downs of the market and pay a steady distribution every year.

Mr Hobbs estimates you can expect an annual rate of return of between 6 per cent and 9 per cent on this bond. In good years, it will be higher and in bad years it will be slightly lower. On average, the return will be in the region of 7-8 per cent.

Commercial General Norwich Union (CGNU) offers a similar product. It is one of the largest quoted financial companies in Europe and it trades in the Republic through Hibernian Life & Pensions. The rates of return on its with-profits bond are similar to those of Standard Life.

CGNU provides a capital guarantee at the end of 10 years. It also has a special offer for the first year. If you invest between £5,000 and £10,000, it will guarantee 6.5 per cent in the first year. Between £10,000 and £25,000 yields 7.5 per cent, £25,000£50,000 gets you 8.5 per cent, and more than £50,000 warrants 9.5 per cent.

One of the problems with these funds is that you must be willing to leave your money for at least five years or you will be penalised. The firms discourage early exiting by imposing penalties. The Standard Life exit charge begins at 5 per cent and scales down to 0 per cent after five years. CGNU's exit charge in the first year is 8 per cent.

On the positive side they can give you a reasonable income.

"These products are good for income generation. You can do this within the annual distribution system and both will allow you to pull out about 5 per cent each year," Mr Hobbs said. He would not recommend a withdrawal of more than 5 per cent per annum as it would almost inevitably erode your capital.

One positive thing about a bear market is that it can offer good buying opportunities if you have the funds to invest. The strength of the US dollar makes investment in the US expensive, but there is still value to be found closer to home, Mr Hobbs said. "Europe is a lot safer territory than America and I would say European large stocks offer good value."

He recommended opting for a fund with a broad spread. Most of these funds look for a minimum investment of around £5,000.

"If you buy now you would be getting into Europe at cheap, if not very cheap prices," according to Mr Hobbs.

For the lion-hearted, there are plenty of high-risk investments. Low high-risk investments could include investment in European small companies, Mr Hobbs said. Financial houses such as JP Morgan Flemming, Invesco GT and Fidelity provide a range of funds with a variety of options along these lines.

For medium high risk you could take a punt in more volatile markets such as South-east Asia and Japan, while high high-risk investments could include countries like India and China. Another high-risk option is the new genopharmaceutical market.

In general, there is an inverse relationship between the degree of risk and the potential return - the problem is there are no guarantees and you could gain a lot or lose a lot, so it is best not to risk money you cannot afford to lose.