Can I get rich from my Stocks & Shares ISA?

Jon Smith explains how the process of time and good stock picks could enable his Stocks and Shares ISA to reach a million.

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I’d love to be rich. But being so is rather subjective. What’s rich to one person may not be so to another. Here, I’m not going to debate the possible ways someone might claim to be rich. Rather, I’m going to quantify that for the purpose of this article, I think it would mean I have a Stocks and Shares ISA with a value of £1 million. It shouldn’t be a surprise to find out that my ISA isn’t worth a million right now. But here’s why I think it could be worth that figure in the future.

Benefiting from time

The crucial advantage I have that I think can help me achieve my goal is the fact that I’ve already started building my ISA holdings. Each year, I’m able to invest £20,000 tax-free in the ISA (if I have that much). Clearly, I’m not always going to be able to invest that amount each year. But I do need to ensure I’m taking advantage of some of the allowance to give me a shot at becoming an ISA millionaire.

For example, let’s say that in 10 years’ time I receive a large lump sum of £100k. This could be from inheritance, taking equity out of my property, or another event. Although it’s fantastic to get, I can’t put it all in my ISA at once. In fact, it’ll take me years to filter this through.

But then, the best way of getting rich via an ISA is to do so slowly anyway! The earlier I start the process, the better. If I invest £15,000 a year on average for the next 23 years with an average growth rate of 8%, I’ll reach my target. I can tweak the figures if I think I can afford to invest more, or if I’m optimistic about the returns I could achieve from my stock picks. But either way, it’s going to take me years to reach my goal, so I’m thankful I’ve already started.

Good picks for my Stocks and Shares ISA

I may have a long time to reach a million in my ISA, but if I don’t pick good stocks then it’s pointless. I need to focus on ideas that could offer me returns not just this year, but for at least the next decade.

The way I’m doing this is by thinking about themes that I feel will be relevant further down the line. I expect climate change to be really big, so I’m adding renewable energy picks and considering some electric vehicle manufacturers.

Another theme I’m happy to buy stocks for is the perpetual need for financial services. Even with a push towards digital money, the core banks and services such as pensions and asset management will always be needed. So I think this is a space I can continue to find value in.

A final idea is dividends. I can buy dividend aristocrats, companies that have a rich history of paying out passive income. I’m not taxed on dividends in my ISA, so can pick it up gross and reinvest to help grow my value further.

In short, I think that I can become ‘rich’ from my ISA. By investing early and being patient, I’m optimistic about becoming an ISA millionaire in the future.

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.

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 considered so you should consider taking independent financial advice.

Jon Smith and The Motley Fool UK have no position in any share mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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