The Motley Fool

The secret to building a £1 million ISA account

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A young man throwing and catching his daughter above his head
Image source: Getty Images.

Owning an ISA that is worth £1m is never going to be an easy process. It requires a huge amount of patience, time and effort to end up with a seven-figure portfolio. And while many investors have tried to achieve that goal, relatively few have been able to obtain it.

Clearly, it’s likely to become easier to build a £1m ISA over time. For starters, the amount which can be deposited has risen significantly in the last decade. Today, an individual can deposit up to £20k in each financial year into an ISA. This makes it easier to reach seven-figure status, but that level may still prove elusive unless an investor can realise that what matters is ‘time in the market’.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Challenging scenarios

For many, an ISA is something that’s a source of frustration. Sometimes, individuals set one up when they are close to retirement as a means of investing excess cash in order to enjoy tax benefits. In such a scenario, they are unlikely to have the time to deposit sufficient funds in the portfolio in order to reach seven-figure status. Even if they buy stocks that surge higher in a short space of time, becoming an ISA millionaire is unlikely to take place given the difficulty in picking a number of multi-bagging stocks.

Similarly, other individuals will invest in an ISA from a relatively young age. It may be seen as a preferential option to a plain vanilla pension, since it offers greater flexibility. For example, if an individual needs the cash within an ISA for emergency use, or to pay for a house/car, then it’s easily accessible. However, this could be seen as a weakness of ISAs. All too often an individual’s nest egg is raided at various points in their lives in order to pay for present-day activities. As such, accumulating £1m becomes more difficult.

Continual investment

Therefore, the trick to generating a significant sum within an ISA is to make generous investments year-in, year-out. Clearly, an individual can only afford what he/she has available at the time. And in the earlier part of a career this is likely to be less than in the latter stages. However, by investing as much as possible every year from a young age and having the discipline to not withdraw it under any circumstances, it’s possible to generate a surprisingly significant sum of money in retirement.

While that idea may sound obvious, it’s difficult to execute in practice. As such, an investor seeking to build a £1m portfolio may be better off focusing on how to maximise their allowance each year, rather than worrying too much about how their stocks are performing on a daily basis. Doing so could make all the difference when it comes to the idea of becoming a millionaire in retirement.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.