What is the best FTSE 100 stock? The ISA millionaires might want to weigh in on the subject. A recent report found there are now over 4,000 of these ISA millionaires – Britons who have invested their way to £1m or more in a Stocks and Shares ISA.
While the ISAs themselves are private, sometimes brokers reveal the broad trends across all of these accounts. One report from AJ Bell did just that, showing the most held stocks inside these accounts, including the top FTSE 100 stock.
Numero uno
The number one ISA millionaire stock? That would be oil major Shell (LSE: SHEL). Across Stocks and Shares ISAs with a million quid or more, a whopping 39% of them have a position in the oil and gas giant. That’s way out in front of any other stocks. Second and third place goes to Lloyds and GSK, which are both in 32% of these accounts.
It’s worth touching upon the nature of investing for a second. Shell is not what some call a ‘million maker’ stock. The share price is up only 50% in the last 20 years. Chances are these millionaires didn’t build their nest eggs by investing in oil and gas.
Rather, Shell is a safe dividend stock; its yield stands at 4.01%. Folks who have already built their wealth often invest for passive income. With a yield of 4% or more, an ISA millionaire could expect to withdraw a £40,000 income stream entirely tax-free. That’s over three times the state pension.
Dividends are never guaranteed. But some dividends are safer than others. Shell has paid a string of dividend payments every three months stretching back to 1945, with the single break being during the uncertainty of the COVID-19 period. That kind of consistency must be attractive to anyone wanting reliable income. As is sometimes said, ‘never sell Shell’.
Tips for building wealth
So, Shell is one to keep in mind after hitting the £1m mark, but about those of us still some way off? As it happens, the same report had some tips for these very people.
Tip one is to refrain from overtrading. This is a pillar of the Foolish investing mindset, too. Pick great stocks and hold them for a decade or more.
This means being disciplined and letting your winners run, rather than profit-taking at the first opportunity. It’s even more important for UK investors who send a small percentage of each stock purchase to HRMC by way of stamp duty.
Two more tips include starting early to give time for the returns to compound, and maximising contributions.
The last tip is another Motley Fool favourite – diversify! Spreading a Stocks and Shares ISA among 10 stocks or more means much more safety because you’re not keeping all your eggs in one basket.
