How could we start with an empty Stocks and Shares ISA today, and turn it into a million pounds?
Do you ever read about big companies making a million pounds an hour, or some other huge amount?
Well, Shell made more than that in 2022. So did HSBC Holdings. I’d quite like to own a bit of those, and let all their hard work pay me some cash for my old age.
It would sure beat working for it, wouldn’t it?
But, a million?
At the last count, there were more than 4,000 ISA millionaires in the UK. And they all started from nothing. So it looks like an achievable goal.
Before I look at the secrets of the UK’s top ISAs, I want to get some maths out of the way. It’ll only be quick, and not too complex, I promise.
In the past decade, the average annual Stocks and Shares ISA return was 9.64%.
If we could manage that, and use up the full £20,000 annual ISA limit each year, we could end up with a million pounds in just 19 years.
Now, returns will vary a lot each year, and some years will even lose money. So that’s not a prediction. But isn’t it an inspiring thought?
Millionaire secrets
So, what are the secrets of the UK’s ISA millionaires? Well, the top 50 have pots averaging around £8.5m. So they must be super good at picking the next get-rich-quick growth stocks, then?
Well, no.
Most of them seem to go for boring old stocks, like the FTSE 100 giants I’ve already mentioned.
And, they hold about 40% of their ISA cash in investment trusts, which spread it over a diversified range of stocks. That’s about twice the amount that non-millionaire ISA investors put into them.
Top three tips
Wonder what the big finance firms say? I’ve just had a look around a few Stocks and Shares ISA providers to see what their top tips are.
I checked Barclays, Hargreaves Lansdown, AJ Bell, Interactive Investor, and others. And these three tips seem to come up a lot…
- Invest as much as we can of our allowance every year
- Go for a diversified portfolio of top-quality stocks
- Start as early as possible, with a long-term horizon
When they put it like that, it just seems like common sense to me. And, well, it is really, isn’t it?
Manage risks
There are always risks with investing in the stock market. We only need to look at some of the pain of the past few years to see that.
But we surely do have to take a bit of risk if we want to aim for a million. And I don’t think the risk is as high as some folks might fear.
Going for diversification and investing for a minimum of 10 years, are the two key things for me. And, over the long term, UK shares have a habit of soundly beating other forms of investing.
