Would it surprise you to learn that some of the UK’s most successful millionaire investors favour FTSE 100 shares for their portfolios?
It doesn’t suprise me at all. And if we want any hope of joining them, we can surely learn from watching how they go about it.
Emma Wall, head of investment analysis and research at Hargreaves Lansdown, says there are “certain behaviours which mark out those who have hit seven figure status on their savings.“
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For one thing, they’re more likely to use both a Stocks and Shares ISA and a Self-Invested Personal Pension (SIPP). They offer different tax benefits, and it’s good sense to make the most of them.
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Hold some cash?
They’re more likely to hold some of their investments in cash too, and high interest rates are a help there. But the main reason seems to be that the average age of Hargreaves Lansdown ISA millionaires is 74. And that means they’re well into cashing in some investments to live on.
Younger investors, who are still reinvesting dividends to build their retirement pots, have less need to hold so much cash.
But apart from the cash, what do these millionaires hold? A mix, apparently. But with “a bias towards single equities and gilts versus those with smaller pots, and they are less likely to have ETFs and passive tracker funds,” notes Wall.
We’re getting there, but which stocks are their favourites? Let’s turn to another investment provider to answer that one.
Top millionaire stocks
When the new ISA allowance ticked round, AJ Bell told us that its ISA millionaires held 75% of their money in individual stocks, including investment trusts.
And the most popular of the lot? It surprised me. It’s Shell (LSE: SHEL), held by 39% of the seven-figure ISA holders. Many of us have been looking for alternative energy stocks to buy. But the wealthy have been stocking up on Big Oil.
Panicking investors sold out of oil in the 2020 stock market crash. But those who bought Shell at the bottom are sitting on a 180% gain today. Oh, and BP has already started to backtrack on its net-zero targets, announced in 2020.
Buy ‘big oil’?
That doesn’t necessarily mean Shell’s a great buy for us all, mind. Giving up hydrocarbons might take a few more decades yet.
And I don’t mean this cynically, but millionaires in their seventies might not worry as much about what happens in 30 or 40 years time as younger investors.
Right now, Shell offers a 3.8% forecast dividend, which isn’t all that big. But before the share price recovery, the yield was a lot higher. And forecasts show it rising progressively in the next few years, alongside earnings growth.
Dividends rule
And that highlights a key factor among millionaire stock choices. Eight out of the top 10 choices at AJ Bell are popular FTSE 100 dividend stocks, with Lloyds Banking Group, GSK, BP and Aviva joining Shell in the top five.
