IT WILL take a brave investor after last week's market turbulence to plunge a further £7,000 into the murky waters of our stock markets. However, savers may feel trapped between a rock and a hard place: if they don't invest, they could lose valuable tax breaks.

To maximise their Isa allowance, savers must invest £7,000 in stocks and shares before April 5, giving a married couple a potential tax break of £14,000.

Fortunately, there are strategies which will allow savers to protect this year's tax allowance without plunging all their savings into the market on a single day.

That said, financial advisers warn savers against trying to pick the bottom of the market on the basis that no one ever does.

Towry Law spokesman Patrick Connolly said: "Look at what happened last time round. The market reached 6,900 at the beginning of 2000 before it started to fall. Investors might have thought that 6,500 was the right time, but then they would have watched it fall to 5,500, 5,000, 4,500, 4,000, 3,500.

"Sadly, when the market finally bottomed at 3,300, no one was buying equities. Everyone was piling into fixed interest."

Punter Southall chairman Geoff Tresman agreed: "Trying to call the bottom of the market is a mug's game."

True, but this is not the strategy followed by professional investors who are currently hoarding cash and waiting for what everyone expects to be attractive buying opportunities when prices settle.

At the same time, financial gurus such as George Soros are warning of a hard landing on both sides of the Atlantic, with leading economies facing recession, which usually means rising unemployment, falling house prices and much pain.

Fortunately, there are investment strategies that can help weather the storm while protecting your tax break which, combined with pending changes to the Isa rules, should guarantee you make money when conditions improve. We show you how.

How much can I invest?

This tax year you can invest £7,000 in stocks and shares or investment funds via a maxi Isa, and the returns will be free from income tax (where applicable) and capital gains tax.

They are particularly valuable for those planning for retirement, because income taken from an Isa is tax-free, whereas your pension is taxed. This is why maximising Isa investments can be crucial.

Alternatively, if you can't face the thrills and spills of the market you can invest £3,000 in a mini cash Isa with a bank or building society and £4,000 in equities. Currently you cannot have a mini and a maxi Isa.

It is worth remembering, though, that while your money is safe in a bank or building society deposit, interest rates are on the slide, and in a year's time the return may not look quite so exciting.

Happily, the options don't end there. It is possible to make the most of your maxi allowance by parking some or all of your £7,000 allowance temporarily in a cash fund.

Historically, you were not allowed to hold cash in a maxi Isa. It was against the rules. But you could hold it temporarily provided the "intention is to invest". No one really knows how long that might be. That said, if you are still in cash after three or four months, interest will be taxed at 20% for everyone. Not bad news for higher-rate taxpayers but pretty grim for those who do not pay tax, such as a non-working spouse.

However, changes to the Isa rules for the next tax year open up even more opportunities for timing your investments. From April, not only do the limits on an equity Isa rise to £7,200 and the ceiling on cash Isas lift to £3,600, but all savings in previous cash Isas can be reinvested in an equity Isa.

Fidelity spokesman Peter Hicks said: "This is a great new opportunity if investors are feeling nervous. They should put £3,000 into a mini cash Isa before April, and then this money, plus any cash Isas from previous years, can be invested in the markets at a later stage when they see greater buying potential."

In this context, many advisers agree that staged investments can be a sensible strategy during times, like these, of high volatility.

Tresman said: "I don't believe you can call the market, but I'm a great believer in splitting the odds. We don't know where the market will bottom, so it makes perfectly good sense to put your £3,000 into cash, and then inject the remaining £4,000 into the market in tranches over the next few months."

AWD Chase de Vere's Anna Bowes added: "The most important thing is to make sure you don't lose these tax breaks because of nervous market sentiment. If nothing else, a mini cash Isa has to be a no-brainer."

"The public mustn't let reeling markets prevent them from saving altogether. At least do a mini Isa and then think about setting up a savings plan. Buying every month is one way to ensure you buy in at the bottom and all the way up."

Choosing an Isa

Funds supermarkets such as Cofunds or FundsSupermarket will usually offer cash funds as part of their package, investing primarily in wholesale money market funds.

Fidelity's FundsNetwork does not currently have a cash fund as part of its maxi Isa, although it does offer a mini cash Isa. However, it is planning to launch a cash fund within its network, investing in a basket of bank and building society accounts. Hargreaves Lansdown already offers a similar option in its Isa package.

Alternatively, it is currently possible to earn around 6% in a mini cash Isa (see table), but it is worth remembering that as many commentators expect interest rates to tumble, Isa returns could be on the slide.

For this reason it may be worth locking into a fixed Isa, with the best one-year deal currently from Halifax, which will peg your rate at 6.4%.

Funds that manage your risk

Multi-asset and absolute or target funds promise to take some of the worry out of investing by managing your money for you.

Multi-asset funds such as Miton Optimal's Arcturus and Midas Capital's Balanced Growth hold a range of investments from equities to cash, fixed interest and property. This spread should protect you from a stomach-churning ride every time markets reel.

Absolute return or target funds similarly aim for a more modest performance at lower risk. Here, Merrill Lynch's BlackRock Target Return fund is popular with advisers. Over the month it is only down 2.31%.

Steve Wilson, a financial adviser at Alan Steel Asset Management, likes the look of Schroder's multi-managed fund Cautious Managed for its low-risk approach.

Bond funds

Another safe haven is bond funds, investing in fixed-interest debt from governments or companies, which are an option in many Isa portfolios. They promise modest capital growth with a regular income, but returns over the long term can be poor.

Bowes added: "Bonds are a building block in a portfolio. When equities fall they are still there holding your investments up. But they won't provide an exciting return. Equities are what help your savings to grow."

Other funds worth considering

Wilson said the crucial thing when going back into the market is to choose a well-run fund with a good track record.

He said: "Investors have done well with Invesco Perpetual High Income, and M&G Recovery is another to consider."