What These ISA Millionaires Have In Common…

Broker reveals ‘secret’ behind millionaire client success.

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It’s good to see the FTSE 100 remaining healthy at around 6,800

…though I was hoping the surging S&P 500 over in the States could have helped our market charge towards the magic 7,000

Just in case you’ve missed it — perhaps because you’ve been spending too much time enjoying the gorgeous weather — the S&P has been making regular all-time highs of late

No less than 16 in the last 3 months alone, apparently…

In fact, according to Bloomberg, American stocks have enjoyed their longest stretch of quarterly gains since 1998, all of which prompted one pundit to say…

The market is partying on. If you think about it over a slightly longer-term basis, Fed tightening is not on the horizon, the corporate outlook is fine, and if you look at dividend yields, stocks are attractive from a valuation point of view.

The exact same things could be said about the UK market, minus the partying, of course.

Imagine what might happen should the FTSE party get into full swing here… look out 7,000 and beyond!

I mean, with the S&P up a super 8% during the first half of this year — as our FTSE puts in a paltry 0.6% gain — we have some catching up to do…

But I’m not hanging around waiting for the party to start… instead, I’m topping up my ISA as the higher £15,000 contribution limit kicks in.

And talking of the new ISA limit…

Boffin broker reveals ‘secret’ behind millionaire client success

…new research from the brainiest boffins at broker Brewin Dolphin suggests we could all now become ISA millionaires just that little bit quicker.

You see, according to Brewin, the new £15,000 contribution limit means it may take less than 27 years of contributions for us to hit seven figures with an ISA, rather than the previous 30 years,

That’s right…

Using “conservative assumptions on growth and income (5% combined) and inflation (2.5%)“…

…and of course putting in the maximum ISA allowance every year…

…by 2040 we’d each enjoy a total ISA fund of £1,071,394 and boast a tax-free gain of £491,194 on a total investment of £580,200.

The sums prompted Guy Foster, the broker’s head of portfolio strategy, to reaffirm what we at the Fool have been saying for years, namely:

The importance of compounding, and the benefits of tax-efficient saving, can deliver life-changing wealth to those who seize the opportunity

And it can be done. Brewin claims to have 15 ISA millionaires on its books, all of whom Mr Foster said had two things in common.

They invested directly in equities and took some risks.

I say well done to those 15.

Flat market? Just look at the gains these shares have made…

Mr Foster may like to use a 5% growth rate for his projections, but I hope to be making a lot more than that in the future.

I mean, who wants to wait until 2040 before becoming a millionaire?

Not me.

And I dare say not you as well.

Thankfully, even in the flat market like the one we’ve seen for the past six months…

…there are still superb opportunities to stock-pick your way to returns far beyond 5% a year.

For example, just look at the gains these shares have made since the start of the year.

  • Shire up 61%
  • Petra Diamonds up 60%
  • Kentz up 46%
  • Centamin up 42%
  • Provident Financial up 40%

Indeed, putting a Shire, a Petra or a Kentz in your portfolio every so often could easily knock a few years off your journey to a million…

Or if you really want to “take some risks“, just as those 15 ISA millionaire clients have done at Brewin…

…you could always gamble on a racy small-cap like me.

Higher-risk retail punt delivers 88% tax-free profit in six months

Avid Collective readers will remember me owning up to holding French Connection at the start of the year…

I admitted back then:

Yes, it’s a small, higher-risk retail punt that’s not for widows and orphans.

But the hapless fashion chain has shown recent glimmers of a turnaround and, with market cap of £35m currently buying almost £190m of sales, could offer significant upside potential if the business can return to profitability.

After two years of watching this share firmly marooned at about 35p, it does seem 2014 could indeed be third time lucky for the fashion chain…

Because I’m chuffed to say the “glimmers of a turnaround” have continued to burn and the share price is up a wonderful 88% year to date.

(I’m chuffed, too, that all my French Connection shares are held in ISAs… so giving me a tax-free 88% profit!)

All told, French Connection’s shares have helped me bag a 15% portfolio return so far this year…which just goes to show anything can happen in this current market!

Still, I’ve not had it all my own way in 2014…

In fact, one of my other racy small-caps issued a profit warning in February, leaving me nursing a 43% loss year to date.

Meanwhile, a few other names in my portfolio have simply drifted lower as investors seek something more exciting…

With hindsight, I should have put much more into French Connection…

But as an investor, I know I won’t get every decision right… and I can’t complain with how things generally have played out for me.

Well, at least since January…

For now, I have my fingers crossed for the second half of the year… and that 7,000 party, of course!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Maynard owns shares in French Connection. The Motley Fool doesn't own any of the shares mentioned in this article.

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