Sales of stocks & shares ISAs increased by 47% in 2017, after record-low cash ISA interest rates saw a new wave of investors look to the stock market for a decent return.
According to Salisbury House Wealth, some 281,000 new stocks & shares ISAs were opened last year, compared with 190,000 in 2016, with the strong performance of equity markets in the UK and globally also helping to push their cause. The FTSE 100 index increased by 7% in 2017 and the S&P 500 index rose by 18%, while in comparison, the average monthly cash ISA interest rate in 2017 was just 0.36%, the lowest it has ever been since the Bank of England began measuring the figure in 2011.
Pointing out that stocks & shares ISAs have outperformed cash ISAs in 12 out of the last 19 years, Tim Holmes, managing director at the advisory firm, said: "Stocks & shares ISAs have become one of the preferred tax-efficient investment vehicles as cash ISA rates remain in the doldrums. Historically, investors have been much better off in the stock market than a cash ISA, particularly as cash savers are currently losing money once inflation has been taken into account."
For savers thinking of making the switch, it's vital to remember that stock market investing comes with certain risks. While money deposited in cash-based accounts is guaranteed not to fall in value, there are no such assurances when it comes to stocks and shares. Indeed, you could even end up with less than you put in. Seeking advice would seem sensible.
The flipside, however, is the potential to earn returns in excess of those available on a traditional savings accounts right now.
Crucially, investments are meant to be kept for the long-term, meaning five years is probably the minimum length of time you need to be thinking about committing your money, giving your funds plenty of time to ride out any market volatility.
See a selection of the stocks & shares ISAs that are available right now
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