‘I opened Cash ISA and Stocks ISA – one made me a lot more money’ | Personal Finance | Finance

Cash ISAs have shot back into the headlines this week after Rachel Reeves’ much feared savings raid failed to materialise, meaning the tax-free savings accounts are still safely shielding up to £20,000 a year from tax, at least for now.

But the government says it’s still hellbent on pushing more people to invest their money, rather than simply leave it sat in cash savings accounts, and is preparing to launch a big advertising campaign as well as a push by banks to get people to move money into stocks and shares.

I have been investing now for almost three years, and I have already made enough money to pay off my student loan. In fact, my situation is almost the perfect case study, as I have both a Cash ISA and a Stocks and Shares ISA and I can comprehensively say that investing has made me far more money than my Cash ISA so far.

The government says it wants to change people’s perceptions around investing. People see it as ‘gambling’, and only see the warnings, such as ‘your capital is at risk, the value of your investments can go down as well as up’.

While that’s true that they carry more risk than a Cash ISA, the reward is that investing usually makes more money, especially over the long term. And in just two years, my Stocks and Shares ISA has made me a lot more money than my Cash ISA.

Right now, my Cash ISA with Trading212 has an interest rate of 3.8%. I could get slightly more – Trading212 has an offer which will boost to 4.9% for 12 months (which I can’t get because I’m already signed up), and Skipton Building Society offers 4.12%, but that’s less than 0.5% more than what I already have.

Even taking the 4.9% rate – putting in the maximum £20,000 into this Cash ISA makes £980 interest in a year, tax-free.

At the same time, my Stocks and Shares ISA with Hargreaves Lansdown is currently up by 16% over two years. At 8% per year average, that’s almost double the best Cash ISA rate available right now, and over double my current Cash ISA rate.

Here’s a breakdown of the performance of each fund I’m invested in over the past 12 months:

HSBC FTSE All World Index – up 10.73%

Liontrust Global Dividend – up 8.72%

S&P 500 – up 11.09%

Vanguard ESG Developed Europe Index – up 9.99%

A total of £20,000 invested across these four would generate 10.13% tax-free growth in a year, or £2,026. That’s over £1,000 more than the Cash ISA.

Going back to the previous year, the numbers are even higher:

HSBC FTSE All World Index – up 20.88%

Liontrust Global Dividend – up 23.80%

S&P 500 – up 24.17%

Vanguard ESG Developed Europe Index – up 12.23%

The effective average rate here is over 20%. A total of £20,000 invested here would make £4,054 in a single year, or £3,074 more than my Cash ISA.

Even though 2025 so far has been much worse for investing than 2024 was – mostly from Donald Trump announcing tariffs left, right and centre and tanking the stock markets – even in a bad year, this set of investment funds is significantly outperforming a Cash ISA. And in a good, year, it’s miles beyond what you’d get in from cash.

How to start investing

Investing can take many forms and most people probably picture Leonardo DiCaprios character in Wolf of Wall Street throwing other people’s cash in obscure stocks and making millions in some borderline pyramid scheme, or hedge fund managers in stuffy boardrooms betting trust fund babies’ millions on phoney tech start ups and then running off with their savings.

In reality, you’re already an investor. If you have a private workplace pension – and it’s been mandatory to be opted in now for years – some of your wages are being invested automatically each month, and will grow enough to give you a comfortable retirement, in theory.

So you’re already putting your money into investments without realising – so why not do it actively as well?

Some people may pick random companies, like Samsung, or British Gas, but there’s always a chance any individual company may have a bad year.

Instead, many investment experts encourage people to use index funds (such as those listed above). These carry less risk, because they are diversified.

The main thing about investing is diversification. Nobody has a crystal ball, so you want to spread your investments across different companies and different markets. These index funds, such as the S&P 500 already do this – the S&P is just a collection of 500 of the largest US companies. Even if one company has a shocker, another one should have a blinder to balance it out, and generally the largest companies like Apple, Microsoft and Nvidia are very good at getting even larger.

As you can see above, you would have made the most money with Liontrust Global Dividend and the least money with Vanguard Europe in 2024, but in 2025, Vanguard Europe has outperformed Liontrust. So hedging your bets, and picking a few funds, is diversification, and on average you will grow over time.

The UK Personal Finance subReddit explains: “It’s entirely possible for stock picks (whether directly or through an actively managed fund) to beat the index. In fact, given the number of stocks and funds out there, it’s a statistical certainty that some of them will be beating the global index at any given point. However, a fund beating the index over the last 3 years doesn’t give you any meaningful indication about whether it will do so over the next 3 years, when you have your money in it. Some “superstar” active fund managers have crashed and burned spectacularly with huge losses for investors, despite years of outperforming their index benchmarks.

“If you’re used to thinking of investing as picking the best companies or timing your buying and selling, buying a fund which invests in ‘a bit of everything’ and holding it for years might not sound like what you think ‘investing’ is about. However it’s actually the strategy with the best evidence behind it.

“The reason it works is that over time, the market as a whole tends to rise more than it falls. This is due to many factors – inflation, technology advancement, productivity gains, population growth, and more. Exceptions exist, but they’re very rare. By buying ‘the world’, you ensure you don’t miss out on any big success stories happening anywhere.”

As bank Barclays adds: “Generally, cash savings are appropriate for goals that are less than five years away – maybe you’re saving for a house deposit or are planning to get married, for example. Crucially, while cash can provide peace of mind that the balance of your savings account won’t suddenly fall just when you need it, which is important if you don’t have much time to wait for it to recover – it can also decline heavily in real terms, so make sure you’re aware of the impact that interest rates and inflation can have on your cash savings.

“There will be periods when the stock markets fall, but there will also be periods when they’ll rise. The longer you keep your money invested, the more time it has to grow, which reduces the risk of your investment falling in value.

“When starting out, it’s common for people to buy shares in a single company. However, this is quite a high-risk strategy because your fortunes are dependent on the performance of that one company. It’s therefore important to diversify and spread your money between different companies, sectors, geographical regions, and also different asset classes. That way, even if one company doesn’t perform very well, others will be doing okay. While not eradicating the risk completely, diversification can reduce the chances of you losing money.”

Of course, you should go to a financial adviser if you’re not sure – I am not a qualified expert, this is just my personal experience here – and there’s tons of resources out there such as on Reddit to explain how and why to get started investing – and making your money grow better than Cash ISAs.