The turmoil on international finance markets over recent weeks has been dramatic. Yet the answer is not to hide one's head in the sand but to use this time both to seek better value investments and ensure a balanced portfolio.

For the first time since 1958, UK households reduced their savings ratio in the first quarter this year. A fall of 1.1 per cent was recorded. Charles Davis, economist at the Centre for Economics and Business Research, said: "The squeeze on real disposable incomes is clearly impacting households' capacity to put money aside."

This is worrying when almost half – 49 per cent – of UK workers are not saving adequately for retirement, according to Scottish Widows.

Whilst much of the UK economy has been in better shape, there are companies that counter the trend through their product or service appeal, good management and quality trading. Savers taking a three-year view have seen 8.79 per cent growth on average across 339 funds (unit trusts and open-ended investment companies) in the UK all companies sector.

For investment trusts, which have the twin advantages of a separate board of directors and the ability to borrow, appreciation has jumped 52.95 per cent on average in the UK growth sector over five years and by 98.21 per cent over a decade to end of September, according to the AIC.

With a balanced range of investments, which will vary on age and expectations, the first criteria may be growth whilst for others income is paramount. Both have risk ratings. However, inflation is the real enemy. Retail price inflation excluding mortgage repayments has now reached 4.8 per cent (and is likely to rise further in next week's figures). This means savers need a six per cent gross return to merely stay still.

The official inflation statistics do not properly reflect the rise in everyday household expenses. This disparity is acutely felt by pensioners and those on fixed incomes. In the last 10 years, money has lost a third of its true value.

Whilst index-linked savings and buy-to-let property should keep up with inflation, equities are the place to be to counter inflation. A successfully managed firm can keep up with inflation by increasing dividends over time.

If you do not have the time or expertise to select individual shares, there are three broad choices:

n seek a stockbroker who will guide the decision-making or even undertake the executive role;

n buy into a collective fund, thereby benefitting from the expertise of a professional manager and his research team and sharing the risk over far more companies;

n be a passive investor by buying into a tracker which follows a recognised stock market index.

Last month the CBI said the UK was in a "mild recession" with growth in 2009 expected to be the weakest since 1992. The flat GDP figures in the second quarter ended the longest continuous run of growth since records began in 1955.

Lower oil prices, rising unemployment, very weak economic activity and little evidence of wage increases have pressurised the Bank of England to reduce interest rates.

UK shares are trading at their cheapest level since the mid 1980s which means there are great value companies to buy into. Side-step firms with high levels of financial and operational gearing, tips Julian Chillingworth, chief investment officer at Rathbone Unit Trust Management.

His team looks for balance sheet strength, cash generation and a visibility of earnings. Tesco is a good example with limited debt, a very strong balance sheet and freehold property worth more than the market valuation of their whole business.

Food retailers have traditionally weathered economic downturns well but smaller companies which can offer cash generation and strong balances should not be ignored. De La Rue is just such a firm, printing banknotes for treasuries around the globe. It plans to raise the dividend by over 50 per cent.

Look, too, for UK based companies with strong overseas earnings so that they are not over-dependent on our island economy.

Among unit trusts/OEIC funds over three years, there are some distinct stars:

n Manek Growth, managed by former chemist, Jayesh Manek, up 41.4 per cent;

n Standard Life UK Equity Unconstrained, managed by Edward Leggett, up 40.5 per cent;

n Rensburg UK Mid-Cap Growth, managed by Paul Spencer, up 39.6 per cent;

n Threadneedle UK Mid 250, managed by Simon Haines, up 38.8 per cent;

n Old Mutual UK Select Mid Cap, managed by Ashton Bradbury, up 36.6 per cent.

Unfortunately, there are some grossly underperforming funds, which have actually lost money over the last three years. They include Rathbone Special Situations (down 33.8 per cent), New Star Select Opportunities (down 28.3 per cent), Sovereign Ethical (down 20.8 per cent), SG UK Growth (down 13 per cent), New Star UK Growth (down 12.9 per cent) and Cavendish Opportunities Retail (down 11.8 per cent).

If you subscribe to the theory that acorns will turn into mighty oaks, this could be the time to back UK smaller companies. Over three years, the 60 funds in this sector have averaged 4.9 per cent growth, dragged down by a few like Close Beacon Investment (down 37.1 per cent), CF Canliffe UK Smaller Companies (down 32 per cent), CF Techinvest Special Situations (down 28.2 per cent) and Cavendish AIM (down 20.4 per cent).

Instead, in this field over the same period, there have been stellar successes like Standard Life UK Smaller Companies (up 42 per cent), Old Mutual UK Select Smaller Companies (up 34.4 per cent), Resolution Asset Smaller Companies (up 28.5 per cent), Baillie Gifford British Smaller Companies (up 25.3 per cent), Cazenove UK Smaller Companies (up 24.6 per cent), Invesco Perpetual UK Smaller Companies Equity (up 24 per cent) and BlackRock UK Smaller Companies (up 22 per cent).

A key way to benefit from a volatile stock market is to invest on a monthly basis. Unless you have immaculate timing, such regular saving ensures a lower average share or unit cost.

Most investment trusts offer such a scheme. The top performers among UK growth trusts over five years were Hansa (turning £100 into £268.44), Keystone managed by Invesco (£166.61), Mercantile managed by JP Morgan (£151.57) and UK Select Trust managed by Scottish Widows (£150.61).

These AIC figures are after deducting typical 3.5 per cent charges.

There is also a lively UK smaller companies investment trust range, led performance-wise over five years by Standard Life (turning £100 into £217.57 after 3.5 per cent fees), followed by Athelney (£205.25) and Montanaro (£168.89).