Are we in another stock market bubble?

The FTSE 100 smashed through the 6800 barrier last week and although a sell-off in Japan and worries about the US and China prompted a cooling by the end of the week, it is still at its highest level since the end-of-millennium frenzy of the technology boom, when it hit an all-time high of 6930.

After that, the blue-chip index more than halved to drop below 3300 in early 2003, before heading back up to 6500 before the 2008 financial crisis. It dropped below 3500 in March 2009, since when it has now more almost doubled.

Lars Kreckel, global equity strategist at Legal & General Investment Management, said: "As prices are back at the heady levels of 2000 and 2007, surely this means we're in another equity bubble? We don't think so – and would argue that the vast majority of the rally so far can be explained with improved fundamentals."

And Paras Anand, head of European equities at Fidelity, said that despite the attractions of shares, the big institutional money has continued to pour into "safety" assets such as Government bonds until recently. He said: "Recent gains, I believe, are an indication that this mindset - is changing. If this is correct, then what we have seen to date has a lot further to go."

The best-timed new fund of recent times was surely the UK Equity Recovery Fund, launched by Standard Life on March 6, 2009. It trumpeted this week that the fund had made a 200% return for investors since launch, turning £1000 into £3000 in four years. It aims to "provide the more sophisticated investor, willing to take on a higher degree of sector and stock risk, with an attractive long-term return".

David Cumming, Standard Life's head of equities and manager of the fund, said the global economic recovery had hardly begun, adding: "There remain significant equity investment opportunities as economic growth begins to pick up."

The fund's biggest holding is BP, with state-rescued banks Lloyds and RBS among its largest holdings, boosting the fund's performance in recent weeks as their shares rallied. Lloyds shares, 26p a year ago, were above 62p last week, while RBS was at 208p (or 20.8p as was) last May and was nudging 344p last week.

According to Rebecca O'Keeffe at online platform Interactive Investor, switching attention now beyond the big markets of the UK and US may be a canny move.

She said: "It's too early to be absolutely calling the top of the market, but for those who have made some healthy profits in the run-up since the start of the year, a degree of redistribution into emerging markets may prove rather astute."

But picking a winning fund is not easy. Research by the Motley Fool investor website suggests as many as 72% of all actively-managed funds fail to beat the stock market.

Nucleus, an Edinburgh-based investment platform used by financial advisers around the country, said passively-managed funds indexed to a market are increasingly being chosen by advisers. Its three top-selling funds last year were Vanguard FTSE UK Equity Index and the Dimensional Global Core Equity and Short Bond funds.

Even Hargreaves Lansdown, whose business is built on selling active funds, admits the "unfortunate truth that many active managers disappoint".

It also sells index or tracker funds, and suggests funds such as Edinburgh-managed SWIP Foundation Growth, a FTSE all-share index tracker with ultra-low costs (0.1%), the Vanguard FTSE Developed World Equity fund (0.3% cost), which excludes the UK, and the BlackRock Emerging Markets Equity Tracker (0.5%).