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UK shares vs Cash ISAs: where should you invest after the 2020 stock market crash?

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Investor appetite for UK shares is still on the ropes after the stock market crash of early 2020. On the one hand, many high-quality stocks are trading at or around their cheapest for several years. But then the threat posed by surging Covid-19 infection rates to the global economic rebound is stifling activity among dip buyers.

It’s no surprise that the popularity of products like Cash ISAs has surged in 2020. While UK share prices could continue to struggle for traction — and more dividend cuts or withdrawals from London companies might be on the horizon — at least you know you’ll make some sort of return on your money, right? And you know you’re not at risk of watching the value of your investments fall of a cliff.

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Cash ISAs are costing UK savers billions!

This being true, I still believe that locking up your money in a Cash ISA is one of the biggest mistakes you can make. Data just released by Janus Henderson reveals the colossal difference between what Britons can make with cash accounts versus what they can expect to make with UK shares.

During the first half of 2020 British savers stashed away £77bn in ISAs, savings accounts and current accounts, Janus Henderson says. This pushed the total to £1.5trn, the biggest cash pile ever and equivalent to the UK’s entire mortgage debt.

This is where things get scary though. While savings run into the trillions, Janus Henderson estimates that they will return just £5.7bn over the whole of 2020. Compare this with the £42.3bn that UK share investors would have earned over the past 12 months in dividend income. While interest rates on savings products are around record lows, dividend yields on UK shares sit at record peaks after the stock market crash.

Getting rich with UK shares

It can be tempting to duck for cover with Cash ISAs and similar products following stock market crashes. But it’s important to remember that turbulence on financial markets is nothing new. And that over the long term, investing in UK shares provides far superior returns on your hard-earned cash.

This is why I’ve continued to buy shares for my own Stocks and Shares ISA in 2020. Sure, I have a Cash ISA as well. But I only use this for so-called ‘rainy day’ money and as a temporary destination for soon-to-be-spent cash. Data shows that long-term investors in UK shares make a terrific average annual return of 8% to 10% a year. So why on earth would I invest elsewhere?

In fact, the 2020 stock market crash enables you and I to turbocharge our long-term investment returns. We can buy top-quality UK shares at ultra-cheap prices and watch them explode in value as the global economy rebounds. It’s a phenomenon that saw the number of Stocks and Shares ISA millionaires explode following the 2008/09 market crash. And with the help of experts like The Motley Fool, I reckon you and I can make colossal returns with UK shares following the 2020 crash.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned 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.

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