5 secrets of Stocks and Shares ISA millionaires

How do we learn the investing secrets that have helped create more than 4,000 Stocks and Shares ISA millionaires in the UK, so far?

| More on:
Young brown woman delighted with what she sees on her screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s all very well people like me telling you how we’d try to become Stocks and Shares ISA millionaires. But what do the millionaires themselves say?

Here are five habits of the most successful investors, which a lot of us can learn from.

1: Investment trusts

Looking round ISA holdings at several providers, it seems the millionaires make greater use of investment trusts than most.

The average millionaire has about 40% of their cash in them, with the average among all accounts down at around 25%.

Investment trusts can provide wider diversification from a targeted strategy. And some have the best long-term dividend growth records of any UK stocks.

2: Cash and funds

According to Interactive Investor, its ISA millionaires have a lot less money in cash and managed funds.

They hold less than 5% in cash, against 8% overall. And they have 11% in funds, compared to 24%.

That makes a lot of sense to me. I’d buy shares in fund managers, for sure. But I’d never hand over any cash for them to manage for me.

And as for the poor long-term returns from Cash ISAs? Well, they’re guaranteed and they’re safer. But they’re not for me.

3: Buying Lloyds shares

Looking at January figures from Hargreaves Lansdown, Lloyds Banking Group (LSE: LLOY) was the most popular stock that month. And Lloyds always seems to come in the top few, every time.

That’s across all Stocks and Shares ISAs. But the non-millionaire investors also tend to be in and out of growth stocks, like Nvidia and Tesla, far more than the top few.

Lloyds has two characteristics I think makes it stand out, in line with my last two secrets. And I guess by now you’ve spotted that they’re not all that secret, really.

4: Dividends, not growth

The million-pound folk go more for dividend stocks than growth. And it seems that’s mainly because they want to put their cash into something that should stand the test of time, and which they can buy and forget.

Right now, we’re looking at a 5.7% dividend yield from Lloyds. It’s not the FTSE 100‘s biggest. But it looks like there should be plenty of cash to pay it. And forecasts show it growing nicely.

National Grid, Legal & General, Shell… dividend stocks like those often help fill the lists. And that’s for most investors, which is nice.

5: Long term

Lloyds is also a good example of millionaire investors’ approach to risk. Yes, Lloyds and the rest of the banking sector face danger now.

High interest rates, bad loans, recession… they could all add to the pressure in the next few years.

But the way to deal with that is to buy shares for the long term. It seems the millionaires don’t care too much about short-term share prices, and more about the cash streams they can hoover up over the decades.

As it happens, Lloyds is one of the most popular stocks with The Motley Fool readers too. I hope we can do our bit to help more of them become ISA millionaires.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Hargreaves Lansdown Plc, Lloyds Banking Group Plc, Nvidia, and Tesla. 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.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »