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‘Should I invest in a Cash ISA or a Stocks and Shares ISA?’ many of you may be asking.
As someone who is 27 years old, I understand the feelings of others in their twenties thinking about what to do with their money.
With interest rates relatively high in recent years, a Cash ISA may seem appealing right now. Let’s see if it’s actually a good option to consider, or if investors are actually better off turning to a Stocks and Shares ISA.
Cash versus stocks
Currently, with a top-tier Cash ISA, you can earn about 4.5% annually. I understand the appeal to this, especially as the interest is guaranteed.
However, investors must consider that we’re in a relatively high interest rate environment. And even if we were to assume that the interest rate remains the same over the next five years, the total return a Cash ISA will make is 24.6%.
Meanwhile, many UK stocks have trumped this over the last five years:
- Rolls-Royce: +972.5%
- AstraZeneca: +79.7%
- BAE Systems: +305.1%
- Barclays: +135.9%
- BP: +89.1%
This is even before considering dividends.
If we compare it to the FTSE 100, we can see that the index could significantly outperform a Cash ISA over time.
Crunching the numbers
Let’s consider a period of 40 years, as it’s around the time an investor in their twenties today will retire.
We’ll also assume the average return of a Cash ISA remains at 4.5% annually over that period, and that the Footsie grows by a compounded annual growth rate of 6.4% with dividends reinvested (as it has over the last 20 years).
If an investor therefore put £1,000 in each today, this is what their returns could look like:
| Year | Cash ISA | Stocks and Shares ISA |
| 1 | £1,045 | £1,064 |
| 3 | £1,141 | £1,205 |
| 5 | £1,246 | £1,860 |
| 10 | £1,553 | £1,724 |
| 20 | £2,412 | £3,458 |
| 40 | £5,816 | £11,958 |
Initially, the difference isn’t so great, at just a measly £19.
However, over the course of the 40 years, a significant difference emerges. In fact, an investor may earn 105.6% more by investing in the FTSE 100 over that time.
There’s no guarantee stocks will continue outperforming, and they are riskier. But the potential returns are much higher. With this in mind, I’ll look at one share I think investors should consider buying to add to their portfolio.
My top UK stock
Shares of mining giant Rio Tinto (LSE:RIO) have enjoyed a very impressive 2026, rising by 16.5% so far.
What’s driven this is a rise in copper prices, which is one of its core products. Looking at its results in 2025, the underlying EBITDA (earnings before interest, tax, depreciation, and amortisation) the company generated from copper increased by 114% to $7.4bn.
This is of no surprise to me. Copper is one of the key metals needed for the massive investment in AI infrastructure over the next few years.
The company is in a strong competitive position for this metal, with its Oyu Tolgoi mine in Mongolia hosting one of the world’s largest known copper deposits.
There are risks for Rio Tinto. Notably, commodity prices can be volatile and hurt the company’s earnings. But in the long term, it could be an under-the-radar beneficiary in the AI revolution.
Because of this, I believe it could outperform the market in the next few years, and investors should consider buying its shares.
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