Investment LISAs come with more risk and reward than cash Lifetime ISAs
A cash LISA is like an ordinary savings account where you earn interest at a specific rate. The rate can go up or down as there are currently no fixed-rate cash Lifetime ISAs. With Investment Lifetime ISAs you can invest in cash, funds, and stocks. It is possible to get better returns by investing in stocks and funds as opposed to cash, but as with all investing there is risk involved and it is possible to lose money if the investments you pick do not perform well.
- Want to see the best Lifetime ISA accounts? Compare Lifetime ISAs here.
Pros of stocks and shares LISAs:
- There is the potential to earn more with a stocks and shares LISA than with a cash LISA.
- They can be a better option if you’re investing your money long term (five years or more) as you’ll have time to make up for any losses.
Cons of stocks and shares LISAs:
- You risk ending up with less money than you put in.
- Charges can eat into your returns.
Pros of cash LISAs:
- You get a guaranteed return through interest.
- There’s no risk of losing your capital.
Cons of cash LISAs:
- You might earn less than with a stocks and shares LISA.
- The interest rate can go down, making your LISA less competitive.
- You may need to check you’re in the highest paying account each year and transfer to a new provider if not.
Whether you should choose a stocks and shares Lifetime ISA or a cash one depends on your attitude to risk and how long you’re planning to invest your money for. If you want to save for your first home over a relatively short period, a cash LISA might be best for you. If you’re saving for your retirement it’s worth considering a stock and shares LISA.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
