Did you know there are hundreds of “ISA Millionaires” here in the UK?
Many are ordinary people with normal jobs. They just had enough time, patience and discipline to save regularly and watch their money grow.
However, as you may have guessed, nobody’s getting rich with 1% Cash ISAs from the bank.
Instead, they’ve used Stocks & Shares ISAs to hold real assets – like stocks, bonds and funds.
These assets can pay you regular dividends and appreciate in value.
Over your life, you could collect £hundreds-of-thousands tax-free.
ISA Millionaires tend to be disciplined savers
That’s something else they have in common.
Every month, they set aside a regular amount. They aim to use their ISA allowance to the maximum.
Right now, your annual ISA limit is £20,000.
For most people this allowance is ample – even difficult to fill.
However, with a few tweaks to your approach, you can probably save a lot more than you’d think.
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One trick is to save first, then spend
After every paycheck, put 10-15% in your ISA.
Do this the moment you get paid.
Budget your spending with whatever you have left.
If you can’t afford 10%, try 5%. If that seems too much, start with 1%.
The real goal is to start the habit of saving.
A lot of people spend first, then wait to see what they have left.
This rarely works.
When cash is readily available, it’s normal to spend more than necessary.
Buy high-quality shares and hold
Most ISA Millionaires are long-term investors.
They buy shares in quality companies and hold them for years – even decades.
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At the time of writing, their average recommendation is up 28.6%.
Long-term investing is perhaps the most important secret to this success.
The problem with buying and selling too often is you’re likely to miss the best days.
Suppose you’d invested £10,000 into an S&P500 index fund in 1999.
By 2019, your investment would be worth £29,845.
However, if you’d only missed the 10 best days in that entire 20-year period, your returns would have been slashed to £14,895. Missing only 10 days would have cut your returns in half!
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Long-term investors can also benefit from compounding
Going back to the S&P500 index, suppose you’d invested £10,000 in 1970.
By 2019’s end, you would have £350,000.
However, with one extra compounding trick, your £10,000 could have grown to over £1.6million!
You do this by reinvesting your dividends. Here’s how it works:
Many companies pay some of their profits to shareholders as ‘dividends.’
This money lands in your brokerage account, just like an interest payment from the bank.
However, many brokerages offer a ‘Dividend Reinvestment Plan’ (DRIP).
This lets you roll your dividends back into the company. You use them to accumulate more shares.
If your brokerage offers a DRIP, you should seriously consider using it. You may even make it a deciding factor when choosing a Stocks & Shares ISA.
As your holdings grow, you get paid larger dividends. These help you gather even more shares. Over time, your returns compound into a runaway snowball of gains.
It’s one of the biggest secrets to becoming an ISA Millionaire.
And it’s never too late!
As all ISA Millionaires prove, time is your greatest asset.
The sooner you start a disciplined plan, the more you stand to make.
But don’t kick yourself for the years you’ve missed.
Take advantage of all the years that lay ahead.
Whoever you are, whatever your age, the time to start is now.