Did you know that there are 1,322 Hargreaves Lansdown stocks and shares ISA accounts worth over £1m at the start of this year? That’s 14% more than six months ago and there is one thing they all have in common. Over half of them have maxed out their ISA allowance by investing in the stock market.
An ISA millionaire is simply an ISA investor whose ISA portfolios have a value of £1.0 million or more. ISAs have been available since 1999 however, the maximum annual investment started out at just £7000 and that figure was split between a cash ISA limit of £3000, and a stocks and shares ISA limit of £4000. Even as recently as the tax year 2015/16, the total subscription limit was just £15240 per annum. Only jumping to the current £20,000 per annum in 2017/18.
So even the most assiduous and well-healed investor, who made full use of their ISA allowances over those 23 years, couldn’t have saved £1.0 million into ISAs over that time frame.
- Related guide: Compare Stocks & Shares ISA accounts
How do you become an ISA millionaire?
First of all, you’ll need to be a committed long-term investor who takes full advantage of the ISA allowances each year, whether that’s through an annual lump sum investment or regular monthly savings throughout the year every year.
Assuming that ISA allowances stay at the current £20,000 limit for the next 10 years if you max out your allowance each year you could save as much as £200,000 in that time.
Time in the market is also your friend, data from Bank of America shows that the longer you leave your money invested in the stock market, the lower the probability of negative returns.
For example, money invested in equities for 10 years at any point between 1929 and 2020 had a just 6% chance of producing negative returns, compared to a 38% chance of loss if the money was invested for just one month.
The final piece of the jigsaw is fund and stock selection or asset allocation – in other words, what you do and don’t invest in will have a major impact on the performance of your ISA portfolio.
- Related guide: How to invest £1m
Hargreaves Lansdown is one of the country’s largest ISA providers and the broker has dug down into its data to shine a light on the trends and traits among ISA millionaire investors.
The age range among the ISA millionaire cohort is surprisingly broad and spans investors in their 30s to those over 100 years old. The average age of Hargreaves Lansdown clients who are ISA millionaires is 72 with over two-thirds being men.
The ISA millionaires have built their fortunes over time getting rich slowly, as you can see by the stypes of shares they have invest in below.
The ISA millionaires at the stock broker have not been excessive risk takers either, but they do invest as much of the funds in their ISAs as possible, into what the broker calls a diverse and balanced portfolio.
A majority of ISA millionaires prefer to invest in managed funds rather than individual equities and they hold a broad range of international funds, not just UK-specific investments.
According to Hargreaves’ research, the larger portfolios among ISA millionaires often have holdings in special situations and global opportunity funds.
Popular managed funds among the ISA millionaires include Lindsell Train Global Equity, Fundsmith Equity, Fidelity Global Special Situations, BNY Mellon Global Income and the IFSL Marlborough Multicap Income Fund.
As Hargreaves Landsdown notes, many of their ISA millionaires have gotten rich over time by allowing their investment returns to compound and perform over multi-year periods even decades.
The 10 most popular shares held by HL ISA millionaires
- Legal & General Group plc
- Phoenix Group Holdings Plc
- Aviva Plc
- IG Group Holdings Plc
- Intercede Group plc
- Beeks Financial Cloud Group Plc
- BP Plc
- Rio Tinto plc
- M&G plc
- Michelmersh Brick Holdings
The 10 most popular funds held by HL ISA millionaires
- Legal & General Global Technology Index Trust
- Legal & General US Index
- Legal & General International Index Trust
- Jupiter India
- Artemis Income
- WS Blue Whale Growth
- Rathbone Global Opportunities
- Legal & General UK 100 Index Trust
- Legal & General European Index
- Fidelity Index World
To become an ISA millionaire you’ll have to take on some risk and invest as much as possible. The more money you have invested over the longest possible period, then the bigger the chance you have of achieving ISA millionaire status, allowing compounding and the reinvestment of dividends to play their part.
Reading between the lines of the Hargreaves Lansdown research ISA millionaire status has happened to quite a few of their clients as a by-product of a disciplined and diversified approach to investing.
In theory you could even become an ISA billionaire however in practice it would be pretty hard to achieve and to do that you would have to outperform the best professional money managers year in and year out, which is not impossible but is highly unlikely.
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 The Sunday Times, 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.
You can contact Richard at richard@goodmoneyguide.com
