Is it really better to keep your savings in boring old cash than venture into the sexy stock market?

As the Queen celebrated her 90th birthday, the Association of Investment Companies noted that 27 investment trusts have also been around for 90 years, and those trusts have delivered an average £900 return on £100 invested over the past 25 years from 1991. The best 25-year savings return on £100 would have been a relatively feeble £537.

But this week veteran broadcaster Paul Lewis claimed that cash has been a better bet than tracking the stock market, for most five-year investment periods since 1995.

He says: “I have long suspected that the merits of cash were underplayed by traditional research which compares poor cash rates with often exaggerated gains on investments in shares.”

You would have had to be on full alert, switching your savings once a year into the top-paying one-year bond, whichever was top of the ‘best buy’ table, to be a winner. The research pits that against a FTSE-100 tracker fund, which reflects the performance of the leading share index, including reinvesting the important element of dividends.

It found that this so-called ‘active cash’ beat the total returns on the tracker fund in 57per cent of the 192 five-year periods beginning each month from 1 January 1995 to the present.

Mr Lewis says it shows that “people who prefer the safety of cash can make returns that beat those on tracker funds in a majority of time periods”, and also “confirms that the risk of making losses on a shares investment is very real”.

On investments held for less than five years between 1995 and 2015 there was a 25per cent or greater chance of losing money, and over nine or 10 year holding periods the chance was still 10 per cent. “Few advisers know those odds still less inform their clients of them,” Mr Lewis says.

As for the traditional studies, the best known is the annual Barclays Equity Gilt Study, which Mr Lewis says exaggerates share gains by excluding the effect of charges. It also understates cash by using Treasury Bills currently paying 0.45per cent or a Nationwide account paying 0.25 per cent, whereas the best-paying one-year savings bond is at 2.1per cent.

Mr Lewis adds: “There is nothing to indicate that the stock market experience of the last 21 years is not typical.”

Laith Khalaf, senior analyst at brokers Hargreaves Lansdown, says savers who want access to their capital within five years should not anyway consider investing in the stock market, because the risk of loss is too high.

But he goes on: “The analysis implies an annual fund charge of one per cent, which in our experience is realistic for the period in question, dating as it does back to 1995. However the funds market has changed significantly over this period, and UK index tracker funds are now available for under 0.1per cent per annum.”

Further, most UK investors, both passive and active, are aligned with the FTSE All Share, where returns have been around 0.5 per cent a year higher than the FTSE-100 since 1995.

Calum Bennie, savings expert at Scottish Friendly, adds: “Putting to one side the fact that few people have the time or inclination to move their money on an ongoing basis into best buy cash savings accounts, the fact is that if they did, these top rates wouldn’t last for long. High demand for them would mean the attractive rate would be quickly withdrawn or reduced.”

Hargreaves’ figures show ‘active cash’ making five per cent a year since 1995, less than the HSBC FTSE-100 Tracker return of 5.9per cent after charges, and left behind by the 7.8per cent of the ‘average stock market fund’ after charges, and by the 12.6per cent achieved by star fund manager Neil Woodford. Eight out of nine investors are in active funds, not trackers, it says – but its figures are based on holding cash or shares for 25 years.

Annabel Brodie-Smith at the Association of Investment Companies says: “Whilst we would agree that five years should not be considered long-term, and equity investors should have a longer-term time horizon in mind, the average investment company is up 40per cent over the past five years, compared to 25per cent for the FTSE 100 and just two per cent for the average high interest cash account. The average UK All Companies investment trust has performed even better, and is up 64per cent.

“Over the long-term, the outperformance is even more significant, despite the credit crunch, and the dotcom bust.”

Patrick Connolly, certified financial planner at Chase de Vere, says Mr Lewis is wrong to say advisers do not issue risk warnings to clients.

“The overwhelming majority of independent financial advisers are well aware of the risks of stock markets and inform their clients, which is why these clients are likely to hold a balanced portfolio including shares, fixed interest, property and cash rather than being fully invested in shares. So while Paul’s research undoubtedly has merit, the lesson from it isn’t to choose cash and completely avoid equities."