Should I invest in a stocks and shares ISA or cash ISA is something many people will be asking right now. Data produced by Schroders helps to identify why the case for a stocks and shares ISA is a more compelling one for those looking to increase the chance of growing their money pot the most in the long-run.
Despite cash ISAs outnumbering the number of stocks and shares ISAs by 5 to 1 – it is the latter type of ISA that has historically generated the most impressive returns:
A saver that had put £1,000 into a cash Isa when they were launched would now have £1,204. If the same £1,000 had been put into a stocks and shares Isa and invested in the UK stockmarket it would be worth £1,663, or 38% more.
Analysis of average Isa savings rates data held by the Bank of England and FTSE All-Share total return data shows that the stockmarket has performed far better than cash since the birth of Isas in April 1999.
The following chart shows that despite various market crashes, a stocks and shares ISA has ‘recovered’ in the long-run and produces superior returns:
James Rainbow, Co-head of UK Intermediary Business at Schroders UK, said:
“On one level it’s understandable that so many more people would prefer savings over investment. After all, the stockmarket turmoil during the financial crisis is still fresh in people’s memory.
“But the data we have provided here adds to an existing body of evidence that shows the stockmarket tends to grow your money far faster than savings accounts over longer timeframes.”
“People need to be comfortable with the fact that there will be ups and downs along the way and accept that history won’t necessarily be repeated. But to me, it seems a simple choice: if you are willing to tie up your money for long periods, history suggests that the stockmarket could be the best home for your money.”