Britons are increasingly achieving millionaire status by investing in Stocks and Shares ISAs and it’s “easy” to get started, an expert has said.
Investment platform AJ Bell has lifted the lid on its ISA ‘Super Investors’ that have built up the biggest portfolios worth £1million or more.
With an average age of 72, many ISA Super Investors with AJ Bell will have built their portfolio over decades.
Some may have initially invested in PEPs (Personal Equity Plans) before ISAs were introduced nearly 25 years ago. Despite this, the youngest ISA millionaire on the platform is only 36 years old.
According to AJ Bell, the Super Investors tend to be much more likely to hold shares than the typical investor.
Among ISA millionaires on AJ Bell’s platform, the average account holds 75 percent in shares (including investment trusts), with the majority of the remainder invested in funds.
In contrast, other ISA investors on the platform usually have about 40 percent in funds and 60 percent in shares. Data also showed Shell was the single most popular stock among ISA investors with a million or more.
However, experts at AJ Bell said this doesn’t imply shares are the best way to invest or the only way to achieve sizeable returns.
Investing in individual shares carries more risk since an investor’s portfolio is likely to be more concentrated on a smaller number of companies than in a fund investment, which offers instant diversification.
According to AJ Bell’s data, its ISA Super Investors hold on average 28 different positions within their portfolios, although this differs dramatically from one investor to the next. Some hold over a hundred different investments, while a handful have just one investment in their portfolio.
Charlie Musson, AJ Bell managing director, said: “ISA millionaires are a fascinating group and they can teach us a few things about the basics of investing, as well as provide a tantalising glimpse of what’s possible through a combination of regular contributions, patience and perhaps a bit of good fortune too.”
Delving into the strategies, Mr Musson said “time” is an investor’s best friend. He explained: “The more you have of it, the better.
“Most millionaires tend to be older because they’ve benefited from decades of compound growth. If you aspire to an ISA million, it is best to get started as early as possible and do so with a ‘get rich slow’ mindset.”
Secondly, Mr Musson said: “There is no guaranteed recipe for success. Some investors invest in highly diversified portfolios, while others have just a handful of positions.
“And while shares and trusts are especially popular among ISA millionaires, there are plenty using funds too. The important thing is to invest in what you feel comfortable with and understand the level of risk you are taking in return for the potential reward.”
Finally, Mr Musson noted: “The success enjoyed by the Super Investors helps to illustrate the beauty of ISAs and the benefits they can deliver for all investors.
“They are very easy to open and get started with and all income and investment growth generated are received tax-free.”
According to AJ Bell, here are the top 10 holdings among the platform’s millionaires:
- SHELL – 39 percent
- LLOYDS BANKING GROUP – 32 percent
- GSK – 32 percent
- BP – 31 percent
- AVIVA – 28 percent
- NATIONAL GRID – 25 percent
- HALEON – 25 percent
- SCOTTISH MORTGAGE INVESTMENT TRUST – 24 percent
- LEGAL & GENERAL – 24 percent
- HSBC – 23 percent.
The figures also show that ISA Super Investors are disproportionately male, although by a relatively small margin. Just over two-thirds (69 percent) of AJ Bell ISA millionaires are men, and figures from HMRC show that 60 percent of all stocks and shares ISA contributions are made by men.
Women account for just over half of all ISA holders across the UK but tend to be more likely than men to hold a Cash ISA, rather than an investment account.
Laura Suter, director of personal finance at AJ Bell, commented: “The fact that almost 70 percent of ISA super investors are men again highlights the gender wealth gap in action.
“Much of this will be down to historical factors, with many of these men contributing to their ISA during an era where men were the main breadwinners and women were more likely working in the home. But even today, we know that women are more likely to save into a cash ISA rather than invest their money – meaning they are financially poorer over the years, missing out on investment returns.
“We want women to be armed with all the information and inspiration to take action with their money, whether that’s saving more, engaging with their pension or starting to invest.”
AJ Bell’s Money Matters website collates this information into one place, as well as gives people access to sign up for a monthly newsletter of tips.
