How to be an ISA millionaire

Jasmine Birtles

Could applying a bit of risk to your saving strategy make you a mint within a few decades?

Did you know that just by investing in ISAs

...you could become a millionaire in less than 30 years? That’s what the asset managers Brewin Dolphin have worked out. They say that investing your ISA in stocks and shares rather than in savings accounts could be the golden ticket and that they already have 15 “ISA millionaire” clients, and a further 40 have assets in ISAs of well over £750,000. 

There’s a limited amount you can put into ISAs each year, so it’s not that these people put loads of money into build up those pots. They were just clever enough to put it into high-performing stocks and shares rather than into flat cash ISAs.

Now the government has increased the amount you can put into ISAs to £15,000 per tax year (April 6 to April 5) you can get even more tax-free returns on your investments.

How do you do it?

Essentially, you need to be braver with your investments and put your money into stocks and shares ISAs rather than cash ISAs. You also need to be in it for the long haul—after five years or more, the volatility reduces and the overall movement tends to be up. 

Brewin Dolphin says the investors who have made lots of money so far invested directly in equities ISAs (shares) and took some risks. But even people who invest conservatively in stocks and shares ISAs—if they put the full allowed amount in each year—could reach the million-pound mark in less than 30 years. 

It’s also important to tick the box that says you want to reinvest any dividends you get on your shares. Dividends are a payout that companies make each year to shareholders if the business has done well. You could just take the money when they pay it out, but if you reinvest it (i.e. buy more shares with it) your pot of money will grow a lot bigger a lot faster.

 

Men have more money in equities ISAs than women

Research company CoreData has found that men are almost twice as likely to hold an equity's ISA than women (41% versus 21.6%). According to their research, women have average savings of £2,500 a year, which could turn into £3,400 if they put that money into equities rather than savings accounts.

 

Which equities ISAs should you go for?

The easy and cheap way to invest in equities ISAs is to do it by putting your money into index-tracking funds. These are run by computers and charge very little in management fees.

Companies such as Legal & General, Virgin Money and M&G offer index trackers that track various indices like the FTSE 100 or the FTSE All Share. They’re easy to invest in. You can even do it over the phone—just make sure you ask them to wrap it in an ISA and to reinvest any gains you make on the fund. 

You could get a company such as nutmeg.com to spread your money for you across a few different investments, within the ISA wrapper. Or, you could invest directly into shares and stock market funds yourself, but you really need to know what you’re doing as it can be very risky.

There are just two months to go before the end of this tax year, so get some money into an ISA product now so you can make the most of this fantastic tax saving as early as possible.

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