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There are around 2,000 Stocks and Shares ISA millionaires in the UK, with an average pot of about £1.4m. That’s £2.8bn stashed away where the Inland Revenue can’t get its hands on it.
Want to try to join the ISA millionaires club? An investor starting today and investing the full £20,000 annual allowance, and earning an ISA return of 7% per year, could do it in about 22 years.
So someone in their forties today, without a penny saved yet, could be a millionaire by state pension age. It means being able to max out their ISA allowance. But, according to government data, 37% of Stocks and Shares ISA investors do exactly that.
And anyone who can manage to invest just £5k per year could still retire with a tasty tax-free quarter million in their ISA.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
What are they buying?
What are the UK’s most successful stock market investors buying? If you think the millionaire secret is to find get-rich-quick multi-baggers, you couldn’t be much further from the truth.
No, these million-pound portfolios are heavily weighted towards blue-chip FTSE 100 companies, and investment trusts.
Interactive Investor is the latest to publish their list of top ISA investments. And, while many investors are shunning them, ISA millionaires are buying more financial sector stocks. Lloyds Banking Group is in the top ten, along with insurance firms Aviva and Legal & General.
Looking back to last year’s data from Hargreaves Lansdown, all three were in their top 10. Lloyds and Aviva made it into AJ Bell‘s top 10, meanwhile, with Legal & General missing out.
Cheap shares
All of these stocks are on low P/E valuations. That suggests ISA millionaires are happy to buy up depressed shares when others are panicking and selling out. They’re also cash generative over the long term, and pay progressive dividends.
As well as cheap financial shares, our millionaires consistently buy stocks like Shell, BP, National Grid, GSK… all favourites among low-risk long-term investors. It does sound like the most successful ISA owners might be getting their ideas from billionaire investor Warren Buffett, doesn’t it?
Investment trusts
Investment trusts are big favourites too. And those are very good ways to get good diversification from a single investment. Looking at the two most popular with Interactive Investor ISA millionaires is interesting.
Alliance Trust is one, and it puts its money into global stocks to target capital appreciation and dividend income. Incidentally, it has raised its dividend for 55 years in a row.
Scottish Mortgage Investment Trust is the other big favourite. And that invests in global, mainly US, growth stocks… things like Amazon, Tesla, Moderna. And ISA millionaires are buying them now they’re down.
Learn from the best
I reckon the best way to achieve long-term gains from a Stocks and Shares ISA is to learn from those who have been the most successful at it.
And for investors who want to target a million as quickly as possible, there’s still a bit more than a month left to make the most of their 2022-23 ISA allowance.
