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The surprisingly boring secrets of ISA millionaires

Hundreds of ISA investors have built nest eggs worth over £1 million – we reveal what some of them have in common.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Imagine having an ISA worth over £1 million.

You could take a generous income that’s free of UK tax each year, and you would have likely saved yourself a fortune in potential capital gains tax.

Sound impossible?

Well despite the restrictions on how much money you can put in, some investors hold ISAs worth over £1 million. Please note these investors have been investing for at least 25 years.

What are their secrets?

We spoke to three ISA millionaires to learn how they built their wealth. And to discover any tips and tricks.

We discovered many differences – some preferred buying shares, while others liked the hands off approach of placing their money with a trusted fund manager. A couple of our ISA millionaires had changed their strategies over time, while one stuck with the advice of his grandfather.

So, what have these ISA millionaires got in common?

This article is not personal advice. If you're not sure if an investment is right for you, please ask for advice. Some of our clients have shared what they have done in the past but this shouldn’t be seen as advice. Unlike cash, all investments can fall as well as rise in value so you could make a loss. Tax rules can change and the benefits depend on your personal circumstances.

1. Picking investments for the long-term (over five years)

‘Investments should be held for the long-term’ is said so often it’s easy to ignore. It’s not exactly exciting and the idea of committing to a fund or share for years and years might be scary as its value rises and falls.

Be calm. If you are investing in shares, you should do it for the long-term and not worry too much about the short-term noise.

Mr C from North Yorkshire, ISA millionaire

You should buy something that if you had to put it away in a box for 10 years and forget about it you would be happy to hold it for those 10 years.

Mr M from Essex, ISA millionaire

Although these quotes emphasise investing is for the long term, it is important to keep up to date with the development of your investments and ensure they are aligned to meet your objectives.

The range of investments you can hold in an ISA has increased rapidly in recent years. If you’re struggling to pick investments, you might want to look at our investment ideas for 2020. Remember all investments can fall and rise in value, so you could get back less than you invest.

How to build an investment portfolio

2. Contributing the maximum amount to an ISA each year

It’s the simplest and least secret piece of advice.

Our ISA millionaires advocated contributing the maximum possible every year.

I put in the maximum amount each year and as soon as possible after the tax year begins

Mr C from North Yorkshire, ISA millionaire

I use my full ISA allowance each year and put the cash in at the start of every tax year.

Mr M from Essex, ISA millionaire

Using your full ISA allowance every tax year since 1999 would have built up a pot of £216,240 in the tax-protected account, and that’s excluding any investment growth on top. The ISA allowance is £20,000 this tax year.

If you’re looking to join the ISA millionaires club, you can get off to a great start by sheltering up to £40,000 in ISAs in the next few weeks for this tax year and next. Just make sure you use this year’s allowance before 5 April, and open your ISA as early as you can in the new tax year.

Find out more about Stocks and Shares ISAs

3. Not overtrading

Sometimes not doing something is actually harder than taking action.

Overtrading – when you dip in and out of an investment to bank profits or take advantage of short-term dips – is often tempting but can be costly. Minor daily fluctuations are hard to read and overtrading can leave you vulnerable to missing out on some of the best days in the market.

I strongly believe actively trading is bad for your portfolio. Depending on the size of the share you buy, you can lose 0.5% every time you trade meaning if you trade that stock twice a year, that’s 1% gone immediately

Mr L from Suffolk, ISA millionaire

Don’t overly worry about timing the market and try not to trade too frequently.

Mr M from Essex, ISA millionaire

Checking in on your ISA regularly and resisting the urge to make a few trades might be tough, but it’s often worth it over the long term.

This is because of a phenomenon called ‘volatility clustering’ first spotted by Benoit Mandelbrot. Basically the ‘good’ days in the market are often close in time to the ‘bad’ days – they both occur in periods of market volatility.

Or, as Mandelbrot put it "large changes tend to be followed by large changes...and small changes tend to be followed by small changes".

Aim to skip the bad patches and you could easily miss out on the gains.

And the other thing they share – their ISA provider, HL

All these ISA millionaires hold their accounts through HL. And they’re not alone. Over 300 of HL’s ISA holders have accounts worth over £1 million.

If you are happy making your investment decisions and you’d like to open a Stocks and Shares ISA with HL you can get started online now. The application takes about 10 minutes.

Money in your Stocks and Shares ISA is free from UK tax. And while investing works best over the long term, you can withdraw money whenever you want.

Learn more and open an ISA

Login to top up an ISA

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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