I’d forget cash savings accounts and put regular money in this investment instead

Although interest rates have risen a bit from the bottom, the cash savings account still looks like a poor investment.

I did a quick search and couldn’t find any type of savings account that pays up to 4%. And in most cases, the rates are lower.

However, asset allocation still exists. And I want my money spread across asset classes. Therefore, one of my biggest investments is the property I own and live in. And that takes care of the allocation for real estate.

But I am reluctant to save too much cash. However, there is enough in the savings account for immediate and emergency needs.

A leading asset class

When it comes to investing, I prefer to put my regular money into a Stocks and Shares ISA. Over the long term, returns from stocks have outperformed all other major asset classes. Although gold as an investment has given stocks stiff competition over the past few decades.

However, stocks and shares still have the edge over the long term. And they have gone beyond property, bonds, cash savings and commodities.

However, of course, not every stock will continue to do well. So, it is important for investors to choose the business of their choice.

One way to drive decent stock returns is to focus on shareholder dividends. Over time, a large portion of the overall gains from the stock market tend to come from dividends.

And there are some stable businesses paying worthwhile dividends today. For example, I like to think from British American Tobacco, which yields above 7%, as I write. And energy companies National Grid has a result above 5%.

But they are not the only ones. I am also very interested in financial technology and trading platform providers IG group with a yield of more than 5%. And supermarket chains J Sainsbury ticks the box for me with a yield close to 5%.

A stable, money-making business

I assume all of these businesses have stable operations and generate adequate cash flow to support a progressive dividend policy. And that means if I’m held in a Stocks and Shares ISA the overall result can grow over time. However, positive results are never certain because any business can experience difficulties from time to time. You can even lose money in stocks.

However, if I had spare cash to invest now, I would be inclined to consider it for my portfolio. My goal is to reinvest all dividends to maintain the compounding process. And, over time, the value of my investment can grow. But such results are not certain.

However, buying dividend shares is not the only way I invest in ISAs. One way to reduce the risk of a single company is by investing in managed funds and trackers. So I’m going to pick some trackers and some carefully selected funds that represent different investment strategies. My goal with that portion of the portfolio is to match the performance of the general stock market.

There are always risks associated with stock-based investments. But the potential returns can beat cash in the bank.