Share ISAs returned four times as much as cash in 2010
Investors remained risk averse in 2010, opening cash ISAs at nearly four times the rate of share ISAs, despite the past year showing share ISAs returned four times as much, analysis from Virgin Money shows.
HMRC figures show 11.9 million cash ISAs were opened in the 2009-2010 tax year compared with just over 3 million shares ISAs.
Investors who put £5,100 into cash ISAs during the 2009-2010 tax year would have seen returns of £145, while the same amount invested in a stocks and shares ISA over the same period would have recorded returns of £593 before charges.
On the average investment of £4,155 recorded by HMRC, the Virgin Index Tracking Trust ISA would have returned £483, compared to a £78 return on the average cash ISAs investment of £2,731.
The strong performance of the FTSE-All Share last year, from 1 January 2010 to 1 January 2011, saw an investment in the Virgin UK Index Tracking Trust grow by 11.62% before charges. Average top rates for cash ISAs were around 2.85%.
Share investors are right to be cautious given the volatile nature of the stock market. Figures suggest however that 'time' and not 'timing' is the key to long term capital growth.
Investing in the Virgin Index Tracking Trust on the 1 January 2007 to the 1 January 2011 would have seen a -3.91% loss. On the upside, investing on the 1 January 2003 to 1 January 2011 would have seen a 63.43% return and overall, to set the long term context, investing on 1 April 1995 to 1 January 2011 would show a 98.46% return illustrating the long term growth potential of share investment.
Grant Bather, spokesman at Virgin Money, said: "With cash ISAs outnumbering share ISA investment by four to one, it is clear savers have been put off the stock market as a result of the volatility seen over the past few years. Unfortunately investors don't have a crystal ball but it is important to consider the mix of cash and shares in your portfolio to ensure you are comfortable with the risk you are taking.
"Whether you go for cash or share ISAs or a mixture of the two it is important to make the most of your ISA allowance. Any savings or investments must be made by 5 April, the end of the tax year. Crucially, unused allowances don't roll-over, they are lost for good."