Investors need to look at their whole portfolio and not ignore the portion that is invested in cash. In particular, you want to make sure that your cash holdings beat inflation, and so don't lose their value.
According to Moneyfacts.co.uk, the effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20 per cent, would have the spending power of just £8,769 today - a fall of 12.31 per cent.
Inflation is currently low - the Consumer Prices Index (CPI) fell from 0.5 per cent to 0.3 per cent during January. But that doesn't mean that it's easy to beat with your cash.
To beat inflation, a basic-rate taxpayer at 20 per cent needs to find a savings account paying 0.38 per cent per year, while a higher-rate taxpayer at 40 per cent needs to find an account paying at least 0.50 per cent.
Most investors are advised to have an emergency fund of three to six months' salary before they start investing in stocks and shares and a suitable place to hold this is in a tax-free cash Isa. Cash Isas are also a good place to build up sums that are needed within the next five years as this will be too short a period to invest in stocks and shares.
Moneyfacts.co.uk research found that, of the 629 non-Isa accounts in the market today, there are 371 that basic-rate taxpayers can choose to negate the effects of tax and inflation.
Isas, however, present a slightly better picture, with 187 out of 213 offering rates that beat inflation. However, the average interest paid across the Isa range is still miserable at 1.44 per cent, even lower than last year's 1.65 per cent.
It's particularly important that you take action if your money has been sitting in old cash Isa accounts that potentially now offer meagre rates of interest. All too often we are drawn to the biggest number in the headline interest rate. Then we forget about it for a while until one year we take a longer look at the annual statement and realise that what was a good deal in year one, isn't any more.
For example, savers with money still languishing in the Halifax Variable Rate Cash Isa and the Santander Easy Isa are receiving just 0.1 per cent in interest.
If you really don't think you'll have time to update your cash Isas to the best rates when your deal finishes, then consider Family Building Society's Market Tracker Cash NISA, which offers instant access to your savings at a consistently competitive rate. The interest rate on this account is automatically updated every three months based on movements in the top 20 immediate-access savings accounts using data supplied by Moneyfacts. The interest rate on this account is currently 1.32 per cent. However, if you want to get the best current easy-access deal for your cash Isa, the top rate is 1.50 per cent from National Savings and Investments Direct ISA.
TOP CASH ISAS
Variable cash Isas: top rate
| Provider | Account name | AER | Min initial deposit |
| Al Rayan Bank | Notice Cash ISA - 120 day notice | 2.00% | £250 |
| Hinckley & Rugby BS | 120 Day Notice Cash ISA Issue 2 - 120 day notice | 1.60% | £500 |
| Shawbrook Bank | 120 Day Notice Cash Isa - Account Issue 3 | 1.55% | £1,000 |
| Dudley BS | Cash ISA 30 - 30 day notice | 1.50% | £100 |
| National Savings & Investments | Direct ISA - no notice | 1.50% | £1 |
Fixed-rate Isas: top rate
| Provider | Account name | AER | Min initial deposit |
| 1-YEAR | |||
| United Bank UK | 1 Year Fixed Rate Cash NISA | 1.65% | £2,000 |
| Julian Hodge Bank | 1 Year Fixed ISA | 1.65% | £5,000 |
| Virgin Money | Fixed Rate Cash E-ISA Issue 110 | 1.60% | £1 |
| 2-YEAR | |||
| Yorkshire Bank and Clydesdale Bank | Cash ISA - Fixed Rate Bond (Issue 27) | 2.10% | £2,000 |
| Post Office Money | Online ISA - 2 year Fixed Rate Issue 1 | 1.95% | £500 |
| Shawbrook Bank | 2 Year Fixed Rate Cash ISA Bond Issue 3 | 1.95% | £5,000 |
| 3 YEARS AND OVER | |||
| State Bank of India | Online 5 Years Cash ISA Fixed Deposit | 2.50% | £15,000 |
| State Bank of India | Online 1000 Days Cash ISA Fixed Deposit | 2.30% | £15,000 |
| Coventry BS | Fixed Rate ISA 25 (30.11.2018) | 2.25% | £1 |
| Virgin Money | Virgin Fixed Rate Cash E-ISA Issue 106 (24.02.20) | 2.25% | £1 |
| Post Office Money | Fixed Rate Cash ISA Issue 14 (3 year bond) | 2.10% | £500 |
Source: Moneyfacts.co.uk as at 3 March 2015
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