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The average Stocks and Shares ISA has delivered an excellent return over the last decade. According to Moneyfacts, it’s grown by 9.64% a year, on average.
By contrast, the average Cash ISA returned just 1.21% a year. I was converted to the glories of equity investing yonks back. But it’s nice to be reminded from time to time.
Let’s see what this means in practice. Say an investor had tucked £10,000 into the average Stocks and Shares ISA some 10 years ago. Today, they’d have £25,101, assuming all dividends were reinvested. By contrast, a Cash ISA would be worth just £11,278.
The stock market has its ups and downs, but history shows it delivers superior long-term growth. Provided investors give it time.
That’s why I prefer equities
In the short run, share prices can go pretty much anywhere. Nobody should invest over a term below five years. Ideally, they should leave their money to compound over decades.
Here’s another figure I’ve stumbled across, from tracker manager Vanguard. It calculates that an investor who put £10,000 in the FTSE All-World Index in 1998 would have £59,825 by the end of last year. The average cash account would have delivered just £18,695.
These figures are slightly harsh on cash. Savings account took a beating when central bankers slashed interest rates almost to zero after the financial crisis. And everybody needs a bit of cash on easy access for a rainy day.
That 9.64% annual Stocks and Shares ISA return’s great, but I’m aiming to do a little better. Rather than investing in a broad index tracker, I pick individual stocks. This strategy carries more risk, but the potential for bigger rewards.
FTSE 250 insurer Just Group (LSE: JUST) is my most successful stock pick of the last year. Its shares soared 95% in that time.
The outlook remains bright. The group’s 2024 update, published on 15 January, revealed a 17% increase in new business profit to £246m. Adjusted operating profit climbed almost 45% to £324m, while its solvency ratio improved to 217%.
Just Group shares are a bit special
These figures demonstrate the company’s strong financial position and growing demand for its retirement products.
I don’t expect Just Group’s share price to double again over the next year. That kind of return is rare. The seven analysts offering one-year share price forecasts have produced a median target of just over 186p. If correct, that’s a modest 14% increase from today’s 163p. I get a small dividend on top. The trailing yield’s 1.3%.
Obviously, I cherry picked that stock. My portfolio also contains its share of losers (everybody’s does). I expect most of them to recover, given time.
There are no guarantees in any of this. I’ve no idea what the average return on my portfolio will be over the next decade. But I’ll be astonished if I didn’t beat cash.
Investing is never a guaranteed route to riches. But with patience, research and a diversified approach, I believe I can beat the average Stocks and Shares ISA over time. That’s my goal and I’m giving it my best shot.
