We all dream of becoming a millionaire with some shrewd investments on the stock market. Thanks to the existence of the Stocks and Shares ISA, the chances of hitting that financial target are higher than without it.
With a healthy annual contribution limit of £20k, and investor protection against capital gains tax and dividend tax, our ability to build long-term wealth is boosted.
Don’t just take my word for it, though. Fresh data from interactive investor (ii) — which styles itself as “the UK’s second largest DIY investment platform” — illustrates how the ISA has led to a boom in the number of UK millionaires.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Millionaire’s row
According to ii, there were 1,607 Stocks and Shares ISA millionaires using its platform as of 28 February. That was up a whopping 61% from the 1,001 recorded at the end of January 2024.
It said that “ISA millionaires have likely benefitted from a strong year for investments,” with these investors enjoying an average return of 11.2% last year. This compares with the 9.5% median return for customers with lower-value portfolios.
Want to know where these high-net-worth individuals invested last year? Here’s a breakdown:
| Asset class | Portfolio split of ii’s ISA millionaires | Portfolio split of all ii’s ISA customers |
|---|---|---|
| Investment trusts | 40.92% | 34.46% |
| Stocks | 35.11% | 25.85% |
| Funds | 13.28% | 22.41% |
| Exchange-traded products (ETPs) | 5.18% | 8.93% |
| Cash | 4.82% | 7.39% |
| Bonds and gilts | 0.68% | 0.94% |
| Other | 0% | 0.02% |
Three top takeaways
Looking further into the data, it becomes clear that:
– Investing early in the tax year can pay off handsomely. According to ii, 32% of contributions from ISA millionaires were made between 6 and 30 April 2024, giving their money more time to grow.
– Patience is key to building long-term wealth. The average age of ii’s ISA millionaires is 73.
– Diversification can deliver spectacular returns. As the table above shows, spreading capital across asset classes can mitigate risk and provide exposure to a multitude of investing opportunities.
A top trust
With 75% of ISA millionaires investing in shares or investment trusts, it goes without saying that targeting the same asset classes seems to be worth serious consideration.
I like the idea of the investment trust specifically because it’s the ultimate in good diversification, is simple and low-cost. One doesn’t have to spend a fortune on lots of individual shares to achieve this.
The Alliance Witan (LSE:ALW) trust is one such vehicle I think is worth a close look. Last year it was the most popular investment among ISA millionaires, beating out blue-chip shares like Lloyds, Shell and National Grid.
In total, the trust holds shares in 237 different companies across North America, Europe, Asia and the UK. And these span a multitude of sectors: major holdings here include Amazon, Microsoft, Visa, Diageo and Eli Lilly.
As with any shares-focused trust, Alliance Witan is vulnerable to broader stock market performance. Indeed, it’s slumped in recent days as fears over ‘Trump Tariffs’ have shaken investor confidence.
But over the long term it’s proven its mettle, rising 83.7% in value over the past five years. I’m optimistic that it’ll continue delivering the goods for patient investors.
This post was originally published on Motley Fool
