WHAT goes up must eventually come down, and the questions on every investor's mind about investment markets are - how soon and by how much.

The tremendous performance of the stock markets in 1996 - Irish equity markets up to this month, for example, had recorded returns of 21.4 per cent while European and American market achieved 24 per cent returns - is good news indeed for pensions funds, life assurance based savings plans and for directly invested stock portfolios. (Keep in mind that these figures do not reflect all the costs, charges or taxes that must be deducted before a final payout.)

Retirees with unit linked pension funds will find the timing of their retirement advantageous, since the nature of unit linked funds is that they reflect the real, current performance of the stock markets.

Similarly, anyone with a maturing unit linked bond or life policy will benefit from the high unit price at the moment the thousands of employees who now receive part of their remuneration or annual bonuses in the form of shares will also be pleased to know that their stake in their company is worth quite a bit more than it was last year or the year before.

Enthusiastic as the fund managers and investment analysts are, how much longer can this `bull' market last? A week ago, markets here, in Britain and the US fell by between 1.5 and 2.4 per cent after comments from the chairman of the US Federal Reserve (the American central bank) suggested that US stocks were overpriced and that there had been irresponsible trading. The £20 billion sterling wiped off the value of stocks on the FTSE 100 have recovered somewhat, but this latest plunge emphasised, once again, the cyclical nature of the stock market. Surges are nearly always eventually `corrected' by a sudden or more, usually, a gradual fall in gains.

So are the markets, as some analysts say, reaching their peak or is there still more growth to be achieved? Stock prices are high, so does this make it a bad time for new investors to enter the market, either by directly buying company shares, life assurance based bonds or investment funds? Would it be more prudent to wait and see if the downward cycle has begun and to buy into the markets when prices are cheaper?

The problem with a booming market is that it attracts a lot of publicity and media interest and ordinary folk start to think that they too should try to "buy into a good thing".

The late US President Kennedy's father, the financier Joe Kennedy, was reputed to have once said, rather disparagingly about the great stock market surge of the late 1920s, that once the shop girls started buying stock that was when I knew it was time to get out." Kennedy sold his shares soon before the 1929 crash and was the living proof of the adage to `buy cheap and sell high'.

Many stock market analysts here are predicting that the outlook for world and Irish markets is still positive, and in the view of AIB Investment Managers, who presented their 1997 investment strategy last week, "characterised by moderate economic growth and relatively low inflation and interest rates". One of the biggest investment companies, AIBIM's views on the British, US, European, Japanese and Irish markets can be encapsulated as follows:

. "Britain is the only major economy where there is upward pressure on interest rates in the short term. The October 1996 increase was a policy response to a pick up in British economic growth in the second half of 1996, which was associated with strengthening consumer demand. The odds are that interest rates will be increased again in the coming months.

. "The US economy is at an advanced stage of its economic cycle but has slowed down in recent months and there is little evidence of an underlying pick up in inflationary pressures. The likelihood is that interest rates will remain steady in the next few months.

. "In contrast to Britain and the US, there is no pressure on rates in Europe and Japan in the foreseeable future. In Europe, economic growth remains subdued, inflation is low and budgetary policy is tightening . . . in order to meet Maastricht targets in 1997. In Japan uncertainty about the sustainability of economic recovery... should keep interest rates around their current historically low levels.

. "In Ireland, short term interest rates (about 5.7 per cent) are a good deal higher than German rates (3.2 per cent) but reflect an economy which is growing strongly. Rates are expected to remain around present levels in the coming months."

With low interest rates, low inflation and other benign economic conditions dictating relatively strong stock markets, the analysts seem confident that there is no reason why 1996's splendid performance shouldn't be at least emulated, if not bettered next year. Investors should keep in mind, of course, that investment analysts are inevitably members of institutions (like banks and stock brokerages) which earn their profits from people buying stocks and securities and so tend to `talk up' good short term positions of the markets.

Smaller investors have taken to guaranteed bonds in a big way in recent years because their memories of 1987 (and the last Great Stock Market Crash), the Gulf War and currency crises of 1991-92 are still sharp. But what has changed since then is that it would appear that certain lessons have been learned both within the stock markets and the world's Central Banks: i.e. not to overreact to price `corrections' or assaults on vulnerable currencies.

AIBIM admitted that 1997 could be a volatile year for currency deals because this is the year that EU countries must prove their qualification for the single European currency deal, which comes into effect at the end of 1999. Ireland seems on course to join that elite club and the pound could be caught up in market volatility, but, according to AIBIM, it shouldn't have the same effect on interest rates (or growth) as it did in 1992.

What this means for people thinking of taking an investment plunge in the next few months is that they must take a long view short term investment in stocks may be a poor decision right now because of the expected volatility and you may not have a steady enough nerve to put up with the priced plunges and rises.

Changes in product design in the past year should help a bit in deciding whether or not to commit hard earned cash to the likes of tracker bonds, guaranteed bonds, single premium with profit and unit linked funds which are more transparent than before. Regular savings products have reduced some up front charges or at least spread them over the life of the contract, and this should suit the vast majority of such investors who seldom hold onto them for the long term - ideally 15 or 20 year period.

If you take the long view, the possibility of short term volatility or even the prospect that we are entering the downward slope of the investment cycle should not matter too much; if history repeats itself (and it usually does in the financial world), within five or 10 years prices will be moving upward again and you will ideally be at the peak of the growth cycle when your fund matures.