ISAs: ‘Compelling’ case for investing in stocks and shares

Interest earned on stocks and shares ISAs over the past year have plummeted but the products are still providing investors with better returns than their cash equivalent.

During the 2017/18 tax year the average stocks and shares ISA grew in value by 4.8%, research by Investment Life & Pensions Moneyfacts revealed. This was a dramatic reduction on the average 20.4% returns earned in 2016/17.

Yet, with the average cash ISA rate coming in at 0.97% over the same period, stocks and shares were still proving the more lucrative options for savers and investors.

Indeed, Moneyfacts said that while performance may have dipped for these ISAs during the tax year, the case for investing in them remained compelling.

Its data revealed stocks and shares invested in the Japanese Smaller Companies ISA fund sector would have grown by 25.5% over the year.

Meanwhile, Jupiter’s Smaller Companies returned 35% over the same time.

And the average stocks and shares ISA had grown by 251% in the 19 years since the introduction of ISAs.

Richard Eagling, head of pensions and investments at Moneyfacts said: “Even though the 2017/18 tax year has been more difficult environment for stocks and shares ISAs, they are still outshining the returns offered by their cash equivalents.

“The nature of investing in the stock market will always involve fluctuating returns but the long-term performance of stocks and shares ISAs remains attractive.”

He added: “The 2016/17 tax year saw record subscriptions to stocks and shares ISAs and a collapse in the cash ISA market, so it will be interesting to see whether the recent volatility in the market dampens investor enthusiasm for this type of ISA.”

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