New rules allow savers to invest more into their cash ISAs, but interest rates are low. Should you also consider a stocks and shares ISA?
“Your recent article on ISAs discussed how the new cash ISAs have a higher allowance, but I am worried that the interest rates on ISAs aren’t particularly good. If I want a better return on my investment, should I go for a stocks and shares ISA, in spite of the new rules?”
It is clear that stocks and shares ISAs have generally generated a better return than cash ISAs over the past 12 months. Recent figures report that the average rate of return for stocks and shares ISAs in 2013/14 was 9.42 per cent as opposed to an average of 1.69 per cent for cash ISAs in the same period*.
But as all independent financial advisers will tell you, past performance is no indication of what something might do in the future: the past year has been a good one but you cannot guarantee a specific return (or indeed a return of any sort!) from a stocks and shares ISA. If the market does less well, then you could end up with less than your original investment.
What you must decide is how you feel about the potential risks of an equity based ISA investment. If you are uncomfortable with the concept of losing your money, then you should perhaps consider the safer route of a cash ISA.
Working out your attitude to risk is important. An independent financial adviser will have the methodology to assess this for you and to ensure that any investments you make are attuned to your risk profile.
Remember: the value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
*According to the Moneyfacts website
About the author
Carl Lamb Founder and Managing Director of Almary Green Investments Ltd, Carl is passionate about delivering a quality service to clients.
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