Now, I’m not saying that Cash ISAs are a guaranteed way to destroy your wealth. I’m saying that they are a recipe of disaster for those looking to retire in comfort if used in the wrong way.
Interest rates on these products have long disappointed. At best they’ve offered an interest rate of just 1.5% (for instant access products) in the past year. These levels look positively heady, however, when you consider the levels that Britain’s banks and building societies have recently cut them to. Most Cash ISAs now offer savers next to nothing. And things promise to get worse should the Bank of England keep on slashing its benchmark rate.
No-notice Cash ISAs are a brilliant way to temporarily stash your cash before investing it elsewhere. They are also a great place to put ‘emergency funds’ you might need to draw upon at a moment’s notice. They have, however, no large part to play in a sensible investment strategy. Not, at least, for those looking to make big returns on their money.
Better than a Cash ISA
I’d much rather put my money to work with FTSE 100 shares. Sure, the world might be on the brink of a long and shocking recession. But there remain many stocks I’d rather put my money in than in a ‘low risk’ product like a Cash ISA.
Ashtead Group (LSE: AHT) is one of these. It’s a share that I myself own, and one which I regret not buying into sooner. It’s likely that rental demand for its construction could suffer in the near term. But it has spent a fortune on acquisitions over the past decade to bolster its geographic and operational footprints and, as a consequence, its market share. This should allow it to outperform the broader industry during these tough times.
What’s more, this well-run Footsie business is also cash rich so investors don’t need to worry about things going pear shaped. Ashtead’s share price exploded 3,000% from the beginning of 2008 to the start of 2020. This was in spite of the global banking crisis that emerged during the period. And I am confident the company will continue to surge in value over the next decade and beyond, despite the economic trouble that the Covid-19 breakout may cause.
Another Footsie star
I’d also happily buy shares in Diageo (LSE: DGE) instead of putting my money in a Cash ISA. Alcohol is one of the more resilient product categories when broader consumer spending comes under pressure. This means that this particular FTSE 100 stock retains a solid profits outlook for the next decade.
Recent data from Statista suggested that global alcohol sales would rise by high-single-digit percentages between 2020 and 2023. It was a projection underpinned by expectations of strong demand in emerging economies, regions in which Diageo has a considerable presence. The coronavirus outbreak, and the subsequent shuttering of bars and restaurants, means that these estimates look set to topple. But beverage sales, and with them revenues at the FTSE 100 business, should start to tick up again with restrictions being eased across the world.
