Where to put cash? 2 December 2022 at 8:02PM in Savings & investments 25 replies 2.3K views

CaptainWales

Hi. I have about £30k in savings that I don't need access to anytime soon. I'm considering either putting this into my S&S ISA and see how it performs or go for a 1 year fixed savings account with interest of about 4%. Not sure which though would give me a greater return over a 1 year period - presumably on balance the fixed savings account at the moment?
Before anybody says it, I know the stock market offers no guarantees - if I decided to put it here, I wouldn't actually be taking it out after a year.   

masonic

Is your question, to paraphrase, "does anyone know if the stockmarket will return more or less than 4% over the next 12 months?"

If so, the answer is no. There's a vast range of investments you could hold in your S&S ISA, and while very few would be guaranteed to deliver 4%+, over a decade or two, many would have a very good chance of outperforming cash savings.

IntoTheForest

None of us can tell you which would give you a better return. What you should do will depend on your risk tolerance and the time frame.

For me anything needed under 5 years will be kept in cash and anything over is invested. I have a fully funded emergency fund etc. 

CaptainWales

Ha! Sort of, interested in people's view on this. The way I see it is that if I don't go for the fixed option then I'm gambling with the interest that I would have otherwise earned. 

masonic

CaptainWales said:

Ha! Sort of, interested in people's view on this. The way I see it is that if I don't go for the fixed option then I'm gambling with the interest that I would have otherwise earned. 

If it helps at all, inflation is very likely to offset all of that interest and more over the next year. Cash is rarely a good long term investment.

Bigwheels1111

5 year fixed for me and an emergency backup fund in Al Rayan easy access at 2.81%.

MX5huggy

CaptainWales said:

Ha! Sort of, interested in people's view on this. The way I see it is that if I don't go for the fixed option then I'm gambling with the interest that I would have otherwise earned. 

You’re risking a lot more than that. Stock market could fall 60% or more. As you invest for longer periods over 5 years then past 10 the chance of a loss on a broad stock market investment becomes smaller and smaller. That’s not to put you off stock market investing. 

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/why-stock-market-returns-are-anything-but-average

if you want to risk just the interest for the potential of bigger returns then that’s Premium Bonds. 

Dave_5150

CaptainWales said:

Ha! Sort of, interested in people's view on this. The way I see it is that if I don't go for the fixed option then I'm gambling with the interest that I would have otherwise earned. 

You are gambling with the capital you invest too 

RobM99

Savings = profit safe, capital safe.
Invests = profit - maybe, capital at risk!

Albermarle

RobM99 said:

Savings = profit safe, capital safe.
Invests = profit - maybe, capital at risk!

Unfortunately with savings your capital is only safe on paper. In real terms it goes down due to inflation.
At the moment if you had £100 K invested for one year at 4%, you would have £104K, but it would only buy £93K worth of goods at today's prices.

RobM99

Agreed however investments are not FCSC protected. That's what I meant.