Cash Beats Shares

Author: Anna Bowes
25th June 2016

For those of you who missed it, financial journalist and broadcaster Paul Lewis (presenter of Radio 4's Money Box) recently put out some interesting research comparing the returns from cash to shares and the winner - well for a majority of the investment periods covered.

Let me explain. Paul looked at what interest you could earn on what he calls 'active cash' - so the interest earned on cash that is moved each year into a best buy one year deposit account with a bank or building society, compared to returns from a simple tracker fund, which tracks the FTSE 100 index of shares in our biggest hundred companies.

Paul found that this active cash beat the total returns on the tracker in 57% of five year periods beginning each month from January 1995 to the present, whilst the tracker won in just 43% of periods.

Clearly we don't know what the future holds, but we've always thought that cash could hold it's own, even in this low interest rate environment. And given that so many of you are keen to keep, in many cases large sums in cash, we know just how important it is to keep the money active to earn as much interest as possible.

The moral of this story: cash can be king, but don't play into the hands of the providers by leaving your money languishing in poor paying accounts, keep it active!

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