Stocks and shares Isas still outshine their cash rivals despite subdued markets, new figures have shown.
Figures from Moneyfacts showed the average stocks and shares Isa fund was up 4.8 per cent on last April.
This was a considerably weaker performance than the 20.4 per cent growth in 2016/17 but is still stronger than the average cash Isa rate of 0.97 per cent in the same period.
Richard Eagling, head of pensions and investments at Moneyfacts, said: "Even though the 2017/18 tax year has been a more difficult environment for stocks & shares Isas, they are still outshining the returns offered by their cash equivalents.
"The nature of investing in the stock market will always involve fluctuating returns but the long-term performance of stocks & shares Isas remains attractive.
"The 2016/17 tax year saw record subscriptions to stocks & shares Isas and a collapse in the cash Isa market, so it will be interesting to see whether the recent volatility in the markets dampens investor enthusiasm for this type of Isa."
The vast majority - 83 per cent - of the 945 Isa funds surveyed delivered growth over the year, in fact the average stocks & shares Isa fund has grown by 251 per cent in the 19 years since the introduction of Isas.
The best performing fund sector, Japanese Smaller Companies, returned 25.5 per cent, and the best fund, Jupiter UK Smaller Companies, returned 35 per cent.
"Holding too much cash is the issue we tend to come across most often and even though it's earning little or no interest, they still keep it there because they think it's safe and risk-free," said Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions.
"As people cannot 'see' the effects of inflation and don't really understand it, there is no urgency to act," he said. "I think if cash/savings accounts were made to show the effects of inflation on their annual statements (just like an investment or pension illustration would do) it would make people aware that their money is actually losing real value and would encourage them to invest for real growth."
Scott Gallacher, from Rowley Turton in Leicestershire said: "I've seen clients with a £1m in cash who are effectively losing over £1,500 per month in real terms but couldn't or wouldn't consider investment as a sensible alternative."
Jeremy Edwards, of Martin Redman in Grantham, Lincolnshire, added: "Cash Isas are familar, secure, advertised and now part of the folk memory. They are also poor value in the long term. Stocks and shares Isas still give most people the feeling that 'there be dragons', when in reality the dragons are small, cute and won't give you much more than a nasty nip."
