We all know that it’s sensible to keep a little money in reserve, and most established professionals will have funds stashed away for a rainy day. However, a lot of these people come to realise that their cash, whether it’s locked away in an ordinary bank account, a cash ISA, or even kept at home, isn’t making as much of a return as it could be.

Moving your money to a stocks and shares ISA can be an ideal solution. Capable of delivering a much higher rate of return than most savings account alternatives, it’s worth looking into if you wish to maximise your cash reserves. 

To help you make an informed decision, here’s some information about stocks and shares ISAs that you ought to know…

Weighing Risks and Returns

Stocks and shares ISAs tend to be capable of delivering a much higher rate of return than their cash alternatives, and the reason for this is simple: it’s because your money is at a higher risk. Although capital that just sits in your bank account may not be earning as much interest as you would like, you know that it’s not going to decrease in value, but the same can’t be said of assets. 

This doesn’t mean that you should write off stocks and shares ISAs out of hand. It’s important to consider how heavily dependent you are on the money you’ve saved, and whether it’s worth the risk of it decreasing in value considering its potential to rise significantly if everything goes to plan. If you know that you’re reliant on your funds, then it’s probably wisest to stick with your current set up. If you’re not, however… Well, a stocks and shares ISA is certainly an option to consider.

Structured Investments

If you’re seriously thinking about moving your capital across to a stocks and shares account, you should be aware that it is possible to minimise the associated risks. There are a number of ISA providers who will guarantee the return of your money through an instrument known as a ‘structured investment’. Should you choose such an arrangement, however, you’ll need to make certain that your provider, plus any third parties associated with the product, are covered by the Financial Services Compensation Scheme before you sign on the dotted line. 

If you’re seriously considering how to make the most of your money, could a stocks and shares ISA be the ideal tax efficient investment instrument for you?

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