ARE shares ready to fly in Japan?

Can Facebook recover from its flotation disaster? Will European shares revive if the euro finds firmer foundations?

These are the questions puzzling small investors as they review recent savings strategies – and wonder how to do better in 2013.

There were bright spots in 2012, especially for investors in smaller companies.

Shortly before Christmas, London’s FTSE 250, the index of medium-sized companies, hit a peak of nearly 12,300, topping its previous peak in 2007. About half of the earnings of FTSE 250 companies are made overseas.

Even Japan’s stock market is stirring after decades of stagnation: the Nikkei 225 is up 14 per cent since the general election was called a month ago, and some think newly-elected Shinzo Abe, leader of the Liberal Democrat Party, could change the direction of his country.

Thomas Becket, chief investment officer at Psigma Investment Management, said: “The Japanese equity market could double from where we are now: it could go from about 10,000 to 20,000 in three to four years.”

Other commentators see energy as the next boom, as the shale revolution gathers pace. Many UK investors have topped up holdings in BG Group, a possible takeover target after the recent slump in its share price.

Investors do not need large lump sums to gain exposure to equities; fund managers allow monthly investments of perhaps £50 to £100, so investors can benefit when unit prices fall.

Halifax Share Dealing spokesman Damian Stansfield said: “More than half (50.2 per cent) of our investors are looking to invest in energy and mining in the next six months.”

Small investors are happy with 2012, said Stansfield.

“Despite the deterioration in the growth forecast, nearly half of investors have seen an increase in the value of their share portfolio in the past six months.”

Because the equities market has been so difficult to predict since the global crash of 2008, small investors focus on managed funds as they boost their Isas and self-invested personal pensions in search of tax-free returns.

Others simply put money which might have stayed in banks or building societies into equities, accepting the added risk.

Barclays Stockbrokers, the UK’s biggest execution-only retail broker with 290,000 clients, says November saw a threefold increase in the value of investments and a near doubling of client deals against November 2011 – with UK shares still popular.

Of the top 20 funds purchased by Barclays clients in November, nine have a UK focus (against six in September), with Global Emerging Markets and Asia Pacific funds also highly popular and the Newton Asian Income fund taking the top spot.

The switch from cash into equities is solid and set to accelerate in 2013.

At financial advisor Hargreaves Lansdown, senior investment manager Adrian Lowcock says investors must consider equities when returns on cash are so miserly, although funds can fall in value too.

He tips the well-regarded Artemis Income fund, paying 4.4 per cent net dividend, comfortably outstripping inflation (three per cent).

At financial advisor AWD Chase de Vere, Patrick Connolly warns that too many UK investors may be over-reliant on income funds largely invested in Britain.

To reduce risk, they should look globally to find the best dividends.

AWD Chase de Vere’s Europe picks include: BlackRock European Dynamic, Henderson European Growth and JPM Europe Dynamic.

This could also be a good moment to buy into funds invested in gold and natural resources, said Mr Connolly.

Jason Hollands, Bestinvest’s managing director for business development and communications, urges small investors to make the most of legitimate taxefficient schemes.

“The annual stocks and shares Isa allowance, currently £11,280, enables a couple to ring-fence £22,560 from the tax man and is worth utilising if you have the cash,” he said.