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ISA millionaires: how they did it

Investment trusts continue to power the biggest accounts at interactive investor.

15th February 2021 09:55

by Jemma Jackson from interactive investor

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Investment trusts continue to power the biggest accounts at interactive investor.

  • 731 ISA millionaires on ii platform
  • The average age of an ISA millionaire is 71
  • Investment trusts account for 54% of the average ISA millionaire account (funds 7%)
  • Scottish Mortgage is the most-held stock, followed by Alliance Trust, Royal Dutch Shell and GlaxoSmithKline

While building up a seven-figure ISA pot might be beyond the reach of most investors, with a bit of research, diligent investing, portfolio diversification and a fair wind, anyone can take steps to maximise the value of their wealth.

Some 731 ISA millionaires are with interactive investor, the UK’s second-largest DIY investment platform, and in line with ii’s broader customer base, a third of these (33%) are women.

Investment trusts appear to be the secret sauce for ii ISA millionaire account holders, accounting for more than half (54%) of the average ISA millionaire account ahead of equities (36%), funds (7%) and ETFs (just 2%).

Investment trusts have tended to outperform funds over the long term (although there are no guarantees for the future). 2020 saw the largest-ever outperformance of the FTSE All Share by investment trusts, with the FTSE Equity Investment Instruments Index (FTSE EII) producing a total return for the year of 17.8%, according to the investment companies’ team at JPMorgan,

Moira O’Neill, Head of Personal Finance, interactive investor, says: “ISA millionaire status will elude most of us, but it is inspiring to see how they got there – and we can all learn from the nation’s wealthiest. With an average age of 71, most will have started out with Personal Equity Plans (PEPs), when ISAs were just a twinkle in policymakers’ eyes. So, the number one lesson is patience – even the millionaires didn’t get there fast.

“Lesson two is the importance of portfolio diversification – and don’t forget investment trusts. Their ability to gear (borrow) to enhance returns, means they can give a portfolio a turbo-charge over the long term – but this can also drag down performance further in volatile times, so be prepared for a bumpy ride. Globally diversified trusts are a good place to start.”

Product

Millionaire ISA

Other ISA

Investment Trust

53.8%

29.1%

Unit Trust

7.4%

26.0%

Bonds

0.2%

0.3%

Equity

36.1%

39.2%

ETP

2.4%

5.4%

Gilts

0.2%

0.1%

While interactive investors customers tend to be buy and hold, focusing on long-term, ‘get rich slow’ wealth creation, when it comes to navigating through the coronavirus market storm, ISA millionaires made twice as many trades last year as the average ISA account (34 versus 17).

Investment trusts feature strongly among ISA millionaire’s top 10 holdings, with Scottish Mortgage (LSE:SMT) the most held, followed by Alliance Trust (LSE:ATST). Witan (LSE:WTAN), RIT Capital Partners (LSE:RCP) and City of London (LSE:CTY) also feature in the top 10 and big FTSE 100 blue chips also dominate.

ISA Millionaires - top 10 Instruments - by number of customers holding

All Customers - top 10 instruments held in ISA - by number of customers holding

Company Name

Instrument

Company Name

Instrument

Scottish Mortgage (LSE:SMT)

Investment Trust

Lloyds Banking Group (LSE:LLOY)

Equity

Alliance Trust (LSE:ATST)

Investment Trust

BP (LSE:BP.)

Equity

Royal Dutch Shell (LSE:RDSB)

Equity

GlaxoSmithKline (LSE:GSK)

Equity

GlaxoSmithKline (LSE:GSK)

Equity

Royal Dutch Shell (LSE:RDSB)

Equity

Witan (LSE:WTAN)

Investment Trust

Scottish Mortgage (LSE:SMT)

Investment Trust

Lloyds Banking Group (LSE:LLOY)

Equity

Vodafone Group (LSE:VOD)

Equity

RIT Capital Partners (LSE:RCP)

Investment Trust

Aviva (LSE:AV.)

Equity

National Grid (LSE:NG.)

Equity

Alliance Trust (LSE:ATST)

Investment Trust

BP (LSE:BP.)

Equity

National Grid (LSE:NG.)

Equity

City of London (LSE:CTY)

Investment Trust

Barclays (LSE:BARC)

Equity

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Home bias is somewhat of a misnomer. When it comes to international diversification, investors are more likely to use funds, investment trusts and ETFs. Even where investors invest directly in the UK in direct shares, around 75% of FTSE 100 company earnings are from outside the UK.

“Nevertheless, having international exposure can be very rewarding for active investors. Take the US, for example, where over the last few years investors have benefited from the double whammy of a strong US market and the weakness in sterling – but anything can happen with international markets, and that applies as much to the US as anywhere else. Again, diversification is key.”

How long could it take to become an ISA millionaire?

The length of time it takes to become an ISA millionaire is determined by the amount you can invest and your investment return.

Were you to start now and invest the full £20,000 annual ISA allowance (assuming it stays the same), and your investment saw 5% annual growth excluding fees, it would take 25 years to reach the £1million mark - £1,002,269.08 to be exact.

If your investments grew by 7% net of fees (a tall order), you could trim three years off that period, achieving £1,048,722.82 in 22 years. But if your investment experienced annual growth of just 3%, it would take 31 years to reach the seven-figure sum (£1,030,055.17).

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

Related Categories

    Investment TrustsUK sharesISAsETFsEuropeNorth America

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