For our ISA millionaires, investment trusts and a little luck are key to a seven-figure portfolio.
Whilst there is always a huge focus on the most popular ISA season funds, data from interactive investor suggests that when it comes to the largest portfolios, it is investment trusts that are more likely to dominate ISA millionaire accounts.
Open-ended funds (unit trusts) typically only represent a small percentage of the investments of interactive investor's ISA millionaires – just 7% on average, compared to more than three times that (23%) amount in investment trusts (closed-end funds) and 59% invested in directly held equities.
Interactive investor ISA Millionaires – average portfolio
|Asset Type||% Portfolio|
Rebecca O'Keeffe, Head of Investments, interactive investor said: "Investors who are starting out tend to favour open-ended funds, and our average ISA account has almost twice as much in funds (23%) than investment trusts (12%). But it is noteworthy that interactive investor's experienced ISA millionaires have more than three times as much invested in investment trusts as funds.
"The preference by successful, engaged and active investors for trusts over funds is backed up by recent statistics compiled for interactive investor by the AIC showing that, on average, investment trusts have outperformed their unit trust counterparts by over 2.5% per annum over the last twenty years*. Most people are trying to eke out an extra 1% here or there on their investments, so an extra 2.5% per annum is an enormous additional return over time, although there's never any guarantees and past performance is just that – in the past."
ISA millionaire - What does it take to get there?
Moira O'Neill, Head of Personal Finance, interactive investor says: "It is inspiring to look at the numbers and see what others have done, but is it reasonable to aspire to becoming an ISA millionaire yourself? How much of it is down to luck, and can 'normal' investors ever reach these levels? Despite some significant market 'blips' over the last twenty years of ISAs, markets have overall been kind to those who have hung on in there with a balanced portfolio. ISA millionaire status may be elusive for most of us - finding the means to utilise the full ISA allowance is a challenge in itself. But patience, discipline and a well-balanced portfolio is a good start to saving for your future."
Rebecca O'Keeffe adds: “If you'd invested the maximum amount in an ISA since their anniversary 20 years ago, you would have contributed just over £206,000 – so you would definitely have needed some element of luck to achieve an annual rate of return of just over 15.5% in order to reach a seven-figure portfolio.
“For those investors who were able to invest in the forerunner to ISAs, Personal Equity Plans as well, this would mean that you had an extra 12 years and a potential sum of over £270,000 invested in total. Investing the maximum since 1987 would take your required rate of return down to 8.5% - still difficult, but perhaps not impossible and likely to explain why two-thirds of our ISA millionaires are aged over 65!”
Trades and Holdings
The average number of holdings of interactive investor ISA millionaires is 34 and the average number of trades made by our ISA millionaires is 46 per year. While this is five times more than a typical ISA customer, the size of their holdings is very much more than five times larger, so it is hard to make a direct comparison.
Rebecca O'Keeffe says: "While the average number of holdings and annual trades amongst ISA millionaires may seem extreme, when you have a large portfolio and most of your assets are in directly held equities, you will want to choose a broad variety of different stocks to generate exposure to different sectors. Our ISA millionaires have been very successful; investors who love the markets enjoy investing and are actively engaged looking after their portfolio, so will buy or sell when they see a good opportunity. Trading less than once a week with a large portfolio seems quite moderate in these circumstances."
Most popular investments held by interactive investor ISA millionaires
|Royal Dutch Shell||Scottish Mortgage||Fundsmith Equity|
|Glaxosmithkline||Primary Health Properties||First State Stewart Asia Pacific Leaders|
|lloyds||HICL Infrastructure||Janus Henderson European Select Opps|
|Aviva||Worldwide Healthcare Trust||Baillie Gifford Global Discovery|
|Legal & General||Templeton Emerging Markets||Investec UK Smaller Companies|
*Current holdings of interactive investor ISA millionaire customers, based on number of customers and not on size of individual holdings @ 20/02/2019
Moira O’Neill, Head of Personal Finance, interactive investor added: "When you are starting out, the go-to place to invest is collective investment vehicles such as funds or investment trusts, where a professional is investing in a broad range of domestic and international companies on your behalf.
"However, over time, as your investment experience develops and you have more money to invest, you may also wish to start investing directly in individual companies – something that our experienced ISA millionaires have embraced. But as our data shows, it takes a considerable amount of time and dedication, with the average ISA millionaire making 46 trades per year."
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.