INVESTING has beaten cash ISAs three times over in one year with experts saying “Brits need to rethink their relationship with risk, and fast”.
Stocks & shares ISA returns have outpaced cash ISAs over the past 12 months, according to the latest analysis by Moneyfactscompare.co.uk.
The average stocks & shares ISA (individual savings account) fund experienced growth of 11.22% over the past 12 months. There have now been three consecutive years of positive growth returns.
In contrast, the Moneyfacts average cash ISA rate returned 3.48% over the same period. The average return is down compared to the previous 12 months.
The rise in gold prices, and general demand over raw materials like metal and oil, had a heavy influence on fund performance over the past year, with the top performing sectors, including Commodities and Natural Resources, returning 28.83%.
The sectors to bounce back from negative returns over the previous 12 months include Latin America, returning 38.24% compared to -11.15% between 2024 and 2025, with high commodity prices, political changes and currency strength observed to boost the sector.
Wake-up call for those who fear investing
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “This should be a wake-up call for those who fear investing, as cash returns have diminished. However, it is important to not rely on returns over the shorter-term when making longer-term investment decisions.
“It is going to take a lot more than positive returns to encourage an investing culture in the UK. Not every saver will feel confident enough to invest, but if they get good guidance, they can start small and slowly gain more knowledge to encourage them to increase their deposits.
“Cash is considered a safe choice, but investing shows the gains that could be made over the longer-term.”
Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, said people need to change their attitude to risk.
She added: “The real story here is behavioural. More than half of people still hold no investments because they fear risk, yet the bigger risk for long-term savers is letting inflation chip away at cash.
“If your time horizon is five years or more, investing through a stocks & shares ISA gives your money a chance to grow, not just sit safely. The best approach is to only keep cash for shorter term stability and where you might specifically need a set amount.
“Invest the rest that isn’t needed short term in a diversified portfolio aligned to your goals and values. Start small, stay consistent and review fees regularly. ISAs are about tax efficiency and the power comes from time in the market, not timing it.”
Antonia Medlicott, Founder & MD at London-based Investing Insiders, said you could lose thousands by keeping your money in cash.
She continued: “These figures are a startling reminder that, while keeping some savings in cash is important for emergencies and immediate needs, keeping too much of your money in a cash savings account can end up costing you thousands in lost potential growth.
“History shows us that investing consistently outperforms cash when it comes to the kinds of returns you can achieve over the longer term. The basic rule of thumb is, if you won’t need that money for at least five years, invest it.”
The real story here is behavioural
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, urged caution with investing.
She added: “It would be dangerous to interpret this as evidence that investing is categorically ‘three times better’ than cash. The higher return on stocks & shares is, in economic terms, the reward for accepting that volatility risks.
“Over a single 12-month period, equity markets may outperform significantly – but they can equally fall sharply. Investors must consider time horizon and capacity for loss, not simply the latest performance figure. Secondly, much of the recent outperformance has been driven by cyclical and volatile areas such as Commodities, Natural Resources and Latin America.
“These sectors are highly sensitive to geopolitics, currencies and commodity cycles. A strong rebound following a negative year does not guarantee sustained performance. Recency bias is a well-documented behavioural risk.”
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, said the government is pushing investing.
He continued: “Hopefully the government’s campaign will help people realise that cash is not always king. There is a frenzy chasing market leading cash ISA rates at the end of the tax year and banks feed into this.
“However, you could be doing yourself a disservice. If you are not sure, seek independent advice.”
Brits need to rethink their relationship with risk
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said inflation eats away at your cash.
He added: “Brits need to rethink their relationship with risk, and fast. Cash is especially vulnerable to inflation, with the real returns being eroded by rising prices.
“People who are new to, or nervous about, investment don’t need to throw themselves into risky funds but, potentially with the help of an adviser, can create diversified portfolios that match their risk profile.”
Ross Lacey, Director & Independent Financial Adviser at Rayleigh-based Fairview Financial Management, said investing is historically more lucrative.
He continued: “This shouldn’t be a surprise to anybody. Over the longer term, history shows that owning a wide mix of company shares across different sectors, industries and countries has been a great way to grow your money. In the same respect, returns on cash are unlikely to outpace inflation over the longer term.
“However, it’s important to note that there will always be years when investments in shares go down in value, inflation is low, and cash returns look attractive. These are exceptions rather than long term trends.”
Photo by Janilson Furtado on Unsplash.
