Many consumers are scratching their heads and asking where they should invest their extra savings. The return on savings deposits barely beats inflation and some alternative financial products are very difficult to understand.

Financial institutions, afraid of losing their customer base, have been searching for the product that will best meet investors' latest demands.

Bank of Ireland Asset Management (BIAM) is offering a number of investment vehicles which, it maintains, are both easy to understand and likely to provide a better return than saving deposits.

The BIAM Mutual Fund Series has six fund options from which to choose - the new Growth & Income Mutual Fund and five renamed unit trusts called Managed Mutual Fund, Equity Mutual Fund, Bond Mutual Fund, Balanced Mutual Fund and Eiri Equity Mutual Fund.

An Irish unit trust is the equivalent of a US mutual fund. In the US, mutual funds are a favoured investment product with the average punter and with pension fund managers. "In the US, more financial wealth is held in mutual funds than in any other asset type, including bank deposits," says BIAM.

Mutual funds pool together contributions from many investors to create a diversified collection of investments. This portfolio usually contains a combination of stocks, bonds and cash in varying amounts based on the objective of the fund which usually stipulates income/growth requirements and acceptable degree of risk. In some cases, a fund objective limits the geographic region in which products may be purchased.

Professional fund managers choose the investment products and asset allocation, or percentage of product within the fund. Investors buy shares in the portfolio rather than the actual stocks and bonds. The value of these shares goes up and down on the value of the underlying assets. Before choosing a mutual fund, investors need to determine their income needs and risk profile. In basic terms, income is usually important to those nearing or past retirement age while growth is desirable for younger investors who can tolerate limited access to their principal investment in the short term. Funds are available that combine growth and income.

In terms of risk, volatile or high-risk investments are not usually advisable for older investors but younger investors have more time to ride out fund fluctuations.

Bank of Ireland's new funds cater for those who can invest a minimum of £5,000 (€6,349) and increase their investment at a minimum of £1,000 (€1,270). The recommended minimum investment time is five years, particularly for funds with a high equity content.

There is a once off, up-front fee, or bid-offer spread of 3.55 per cent. After that a management fee is charged on an ongoing basis from the fund, ranging from three-quarters of a per cent to 1 per cent. Switching between some funds in the series is allowed, but this may incur a small fee.

Tax is deducted from the funds at 24 per cent, except Eiri Mutual Funds which will be charged at 20 per cent from April 5th. Under current legislation, a personal investor in these mutual funds has no further personal liability to Income or Capital Gains Tax.

The series offers balanced, equity (stock) and bond mutual funds. Balanced funds combine stocks, bonds or cash while the other types focus specifically on equities or bonds. Two of the funds, called Eiri, concentrate investments in Irish companies.

Mutual funds are a good way for investors to get a taste of the stock market while reducing risk through professional portfolio management and a portfolio of products rather than a single stock. Before investing, it is important to understand the product and have a discussion regarding your expectations with an independent investment professional. As with all investments, past performance is no guarantee of future returns.

For more information on the funds call Bank of Ireland Asset Management at (01) 639 9000. A guide to investing in the low-interest rate environment, Investment Advice for Life, is also available.