Two habits ISA millionaires share as number of savers achieving it soars (Image: Getty)
The number of millionaires in the country is rapidly rising, with the successful savers sharing two habits in common. According to investment company Interactive Investor, the number of ISA millionaires holding deposits on its platform has surged by 61%, rising from 1,001 at the end of January 2024 to 1,607. The average age of an ISA millionaire is now 73, one year younger than in January 2024.
Myron Jobson, senior personal finance analyst at said: “ISAs have been a game changer for investors, offering a tax-free shelter for savings and investments that allows every penny of profit to work harder. The not-so-secret for building a seven-figure ISA portfolio is patience. The fact that the average ISA millionaire is 73 years old underscores a simple truth: time in the market is key to building long-term wealth.”
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Investment experts have shared the “not-so-secret” recipe for building a seven-figure ISA portfolio. (Image: Getty)
He added: “Many of these investors have benefited from decades of compounding, with some capital dating back to the days of TESSAs (tax-exempt special savings accounts) and PEPs (Personal Equity Plans) before ISAs came into play. It’s a testament to the power of long-term investing and making the most of tax-efficient wrappers.”
Among the habits shared by these ISA millionaires, two stand out:
- They start early: 32% of ISA millionaire contributions for the year were made between April 6 and April 30, 2024, just after the new tax year began.
- They trade actively: ISA millionaires made an average of 32 active trades per year, excluding regular investing.
Further insights from reveal that ISA millionaires tend to have a very different approach to investing compared to typical ISA holders. Laura Suter, personal finance director, said: “The Super Investors tend to be much more likely to hold shares than the typical investor. Among the ISA millionaires on AJ Bell’s platform, account holders average 87% in shares (including investment trusts), with most of the rest in funds. By comparison, the figure is just 33% across other ISA holders.”
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In addition, Ms Suter noted that “Oil giant Shell is the single most popular stock among the wealthiest ISA investors, retaining top spot among the list of most popular holdings.”
ISA Super Investors with AJ Bell typically hold an average of 25 different positions in their portfolios, although this number can vary significantly – some hold over 150 investments, while a few maintain just a single investment.
This diverse investment approach underscores the varied strategies employed by ISA millionaires in their pursuit of long-term wealth.
Richard Hunter, head of markets at Interactive Investor, said: “Compounding is the effect of an initial lump sum plus interest earned, and then effectively interest on that interest. Over time, compound interest becomes an increasingly powerful engine of growth, leading Albert Einstein to describe the phenomenon as the eighth wonder of the world, adding that ‘He who understands it, earns it. He who doesn’t, pays it.’”
Mr Hunter added: “This is certainly not lost on our ISA millionaires, whose portfolios are littered with high-yielding shares which support this narrative.”
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How to become an ISA millionaire by the age of 65
Interactive Investor calculated how much first-time investors of different ages need to invest each year to reach £1million by age 65. The assumptions are based on a 5% annual investment growth, contributions increasing by 2% per year, and investments being made at the start of each year.
Under these assumptions for first-time ISA investors:
- A 25-year-old would need to invest £6,000 in the first year, increasing contributions annually by 2%, leading to total contributions of £362,400 over time.
- A 35-year-old would need to start with £11,400 per year.
- A 40-year-old would need to begin with £16,400 per year.
AJ Bell says the youngest ISA millionaire on its platform is just 35 years old.
Ms Suter said: “Astonishingly, a handful of extremely successful ISA investors in their 40s have racked up portfolios worth over £3million. Although, it’s worth pointing out those with a sizeable portfolio at such a young age often tend to pursue a high conviction strategy focused on specific stocks, which won’t be for everyone.”
She added: “ISA millionaires are a fascinating group, and they can teach us a few things about the basics of investing, as well as provide a tantalising glimpse of what’s possible through a combination of regular contributions, patience and perhaps a bit of good fortune too.”
The most obvious lesson is time is a crucial ally when it comes to investing. Ms Suter said: “Most millionaires tend to be older because they’ve benefited from decades of compound growth and years of contributions. If you aspire to amass an ISA million, it’s best to get started as early as possible and do so with a ‘get rich slow’ mindset.
“Second, there is no guaranteed for success. Some investors invest in highly diversified portfolios, while others have just a handful of positions. And while shares and trusts are especially popular among ISA millionaires, there are plenty using funds too. The important thing is to invest in what you feel comfortable with and understand the level of risk you are taking in return for the potential reward.
“Finally, the success enjoyed by the Super Investors helps to illustrate the simplicity of ISAs. A straightforward financial product, ISAs allow you to invest in a range of assets in a single account without worrying about dealing with the tax headache of income, dividend or Capital Gains taxes. Your total return is free from the taxman, so you can invest hassle-free.”