Forget a Cash ISA, here’s why I’d use a Stocks and shares ISA to aim for a million

A maxed-out Cash ISA could be worth a quarter of a million pounds now. Here’s how a Stocks and Shares ISA could do a lot better.

Happy male couple looking at a laptop screen together

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Why should we take risks with a Stocks and Shares ISA, when Cash ISAs now pay good interest rates?

I think that’s a very good question. I mean, a quick search for top Cash ISA rates quickly finds some offering more than 5%. That’s for a fixed term, but we’re in it for the long term, right?

Still, even if I want easy access to my cash, I could bag around 5%. Unlike any stocks and shares returns, that’s guaranteed too.


Yes, I can see why folks might be tempted to put their savings into a Cash ISA in these troubled times. And the number of people taking them up Cash continues to outstrip Stocks and Shares ISA take-ups.

According to the latest research by InvestEngine, anyone who maxed out their ISA allowance in a Cash ISA every year could have done quite well.

Had they done it since ISAs were introduced, they could have £274,650 in their accounts now.

But I’m having none of it, and I’ll tell you why.

Where the millionaires are

The thing is, there are around 4,000 ISA millionaires in the UK. And it doesn’t sound like they made their millions using Cash ISAs, does it?

These millionaires mostly went for the same approach of using their full allowance every year, but in a Stocks and Shares ISA. And they did that through all the same ups and downs as the Cash ISA investors.

That includes the banking crisis, the Brexit shock, Covid…

How much they have

Yes, a Cash ISA would have been safer, with its guaranteed interest. But taking the risk has just about quadrupled the returns enjoyed by millionaire Stocks and Shares ISA investors.

Well, actually, that’s going on the smallest sum needed to qualify for millionaire status. The most successful of them have way more than that.

In fact, the top 50 have built up an average pot of a big fat £8.5m.

Quarter of a million from a Cash ISA? Pah!

How might we join them?

So what do we do to join the UK’s ISA millionaires? Well, we have to understand that taking the extra risk doesn’t in any way guarantee better returns.

I don’t doubt that some folk have gone for more ambitious Stocks and Shares ISA strategies, and have crashed and burned.

So the key, for me, is to reduce risk via diversification.

Lower the risk

One way to do that is to use investment trusts, which spread the cash across a range of stocks within their stated strategy.

My favourite trusts are the ones that go for UK equity income, buying top-drawer FTSE 100 stocks.

And, as it happens, ISA millionaires put more of their cash into investment trusts than the average ISA punter. It’s up around 40%, compared to an average of 25%.

Max out, long term

Other than that, it’s all about using as much of our allowance as we can, and buying stocks we want to hold for at least a couple of decades.

Will this approach get me up among the ISA millionaires? I don’t know, but I reckon it gives me a better chance than a Cash ISA.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

While the US stock market booms, the FTSE 100 lags behind. Or does it?

In November, global stock markets had their best month in over three years. Meanwhile, the UK's Footsie keeps falling further…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

What should I buy for my Stocks and Shares ISA in 2024?

From 6 April 2024, UK adults qualify for a new Stocks and Shares ISA allowance of £20,000. But what assets…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Could this FTSE 100 stock be like buying Apple shares in 2009?

Investors who bought Apple shares after a 100% gain in 2009 have done pretty well for themselves. Could FTSE 100…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Small-Cap Shares

2024: a once-in-a-decade chance to build wealth with penny stocks?

A lot of penny stocks and small-cap shares have tanked over the last two years. And Edward Sheldon now sees…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

3 reasons the Rolls-Royce share price can keep going higher

It might be the top-performing FTSE 100 stock of 2023, but Stephen Wright thinks the Rolls-Royce share price can go…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

2 dirt cheap value stocks I’m buying

These two FTSE 350 value stocks have performed miserably in 2023. However, Andrew Mackie expects their fortunes to turn in…

Read more »

Investing Articles

Is the BT share price a golden opportunity?

Oliver Rodzianko can smell the opportunity with the BT share price down 75% since December 2015. Yet, he thinks there’s…

Read more »

Close-up of British bank notes
Investing Articles

My £3-a-day second income plan for 2024

Christopher Ruane sets out how he could try to build a growing second income in the coming year for just…

Read more »