Investing returns ‘beat cash over 30 years’

A £10,000 pot invested in the best-performing fund would earn you almost £400,000 more than the average savings account.

Investing in the stock market can produce vastly bigger returns than leaving your money in savings accounts, according to new research.

Had you stashed £10,000 in the average savings account back in 1986 you would now have a balance of £28,196, according to Fidelity International.

However, if you had invested the same sum in the FTSE All Share, your pot would now be worth £121,466.

Investing that sum in the FTSE 250 would have grown your pot to £265,035.

The difference was even more pronounced when you looked at the performance of some of the best-performing investment funds.

Investing £10,000 over the same period in the Fidelity Special Situations fund would have seen your pot balloon to £401,868.

Alternatively, if you’d gone for the BlackRock Continental European fund, you would now have £427,181 – that’s nearly £400,000 more than if you’d left your money in the bank.

How your money could have grown

Total return FTSE All Share	Total return FTSE 100	Total return FTSE 250	Fidelity Special Situations Fund	BlackRock Continental European Fund	Cash
£121,466	£126,867	£265,035	£401,868	£427,181	£28,196

“If anyone is unsure about the benefits of investing in the stock market over stashing cash under the mattress, especially over the long term, then our calculations highlight just how rewarding investing can be,” says Tom Stevenson, investment director for personal investing at Fidelity international.

“On a 30 year time horizon – a realistic investing timescale for many people – simply investing, holding on and reinvesting dividend income can lead to really impressive returns.”

Cash can beat shares

While these figures are impressive it is possible to outperform the stock market with bank accounts.

Money journalist Paul Lewis conducted extensive research into cash vs shares and found that, if you are on the ball and move your money to the best-paying savings account every year, it is possible to beat the stock market.

Fidelity’s figures are based on the average savings account, but if you look at the best-buy savings accounts the battle becomes a lot tighter.

Lewis compared ‘active cash’ (where you move your money to the best one-year bond every year) with investments in a FTSE 100 tracker and found that over 20 years cash won, by a whisker.

“I have long suspected that the merits of cash were underplayed by traditional research which compares poor cash rates with often exaggerated gains on investments in shares,” says Lewis.

He added that the returns used to show the success of the stock market don’t factor in fees and charges.

But, as Fidelity International points out, if you had picked a good actively-managed fund you could vastly outperform cash without having to touch the money over the 30 year period.

It is also worth noting that Fidelity’s figures are net of fees.

Decide what’s right for you

While Lewis has shown that, while cash can be worthwhile if you’re willing to put in the effort, investing in the stock market is more likely to offer better value over the long-term.

“With interest rates at record lows and looking as if they could fall further, the adage that cash is king really doesn’t hold much water these days,” says Stevenson.

Of course, there’s no need to commit entirely to one or the other. Instead, you should consider how much risk you are happy with and diversify your portfolio accordingly.

As we wrote here, a balanced portfolio should contain a mix of investments, bonds and cash.