3 reasons to consider a Stocks and Shares ISA over a Cash ISA in 2025

Cash ISAs remain popular. Looking at government figures, there’s currently around £300bn stashed away in these products. If one is serious about building wealth, however, a Stocks and Shares ISA could be smarter. Here are three reasons to consider this type of ISA instead in 2025.

Investment funds

One advantage of Stocks and Shares ISAs is they (usually) offer access to investment funds. These products provide diversified exposure to the stock market and tend to generate much higher returns than cash savings products (like the Cash ISA, although admittedly it’s a safer option) over the long term.

An example of a fund (and one I think worth considering) is Fundsmith Equity. This is a popular product that is invested in about 30 different companies globally.

While this fund has had its ups and downs over the years (like all stock market-based investments), it has performed very well over the long term. Since its launch in late 2010, it has returned about 15% per year (before platform fees) – trouncing the returns from cash savings.

Investment trusts

Stocks and Shares ISAs also offer access to investment trusts. These are similar to funds by providing diversified exposure to stocks, however, they’re traded slightly differently, and often have lower fees.

One investment trust I’ve invested in (and I think is also worth others considering) is Scottish Mortgage. This is a growth-focused trust that invests in disruptive businesses like Nvidia and Amazon (it has nothing to do with Scottish mortgages!)

This trust can be volatile at times due its focus on tech stocks. However, over the long term it has done well, delivering a share price gain of about 430% over the last decade (roughly 18% a year).

Individual stocks

Perhaps the biggest advantage of Stocks and Shares ISAs, however, is that they offer access to individual stocks (both UK stocks and international ones). In other words, you can invest in individual businesses.

This is riskier than investing in a fund or investment trust. Because every company has its own risks and if something goes wrong, its share price is likely to fall.

On the flip side however, there’s potential for much higher returns. With stocks, it’s possible to make 100%, 200% or more from a single investment in a year.

One example of a stock that I believe is worth considering today is Uber (NYSE: UBER). A US-listed business, it operates the world’s largest rideshare platform.

This company is growing at a rapid rate at present. In 2024, the number of trips booked on its platform rose 19% while the company’s revenue jumped 18%.

Looking ahead, I see plenty of growth potential. While the company operates in many countries across the world today, it still has plenty of room to expand to new cities and offer new services (such as train/boat rides).

Now, this stock can be volatile at times. Recently it has been swinging around wildly on the back of concerns over Tesla’s robotaxis (which are a potential risk).

But over the last five years (which is generally the minimum recommended timeframe for investing in stocks), it has roughly doubled in price. And looking out over the next five years, I see the potential for further gains as the company expands into new markets.

The post 3 reasons to consider a Stocks and Shares ISA over a Cash ISA in 2025 appeared first on The Motley Fool UK.

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Ed Sheldon has positions in Amazon, Nvidia, Scottish Mortgage Investment Trust Plc, Uber Technologies, and Fundsmith Equity. The Motley Fool UK has recommended Amazon, Nvidia, Tesla, and Uber Technologies. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.