How to become an ISA millionaire

3 minute read

We discuss six key considerations to help reach ISA millionaire status.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

The highly coveted status of being an ISA millionaire belongs to around 2,000 ISA millionaires in the UK at the last count.1 If this is something that appeals to you, there are some important things to think about to help you get there.

Here are six key considerations

1. Max out your ISA

To get to £1 million as fast as possible, the first step is to invest the maximum each year. The most you can invest in an ISA in any given tax year is £20,000. If you started saving today and the ISA limit remained at £20,000, it would take you 25 years to become an ISA millionaire, assuming an average annual return of 5%.

2. Choose investments carefully

As well as the level of contributions it’s the investments you decide to place inside an ISA and how they perform that are the main drivers that will determine whether you can one day achieve ISA millionaire status.

The smart choice for any long-term investor is to have a well diversified portfolio. The classical argument for a diversified portfolio is that it enjoys reduced volatility because when one of your investments isn’t performing so well, another will hopefully be performing strongly. By spreading your money across a range of investments, giving you exposure to different geographical regions, industries and asset classes – such as shares and bonds – you can spread your money far and wide.

Exploring investments on Smart Investor

3. Invest as soon as the tax year begins

The next key part of your strategy could be to invest early in the tax year. It means you will have up to an additional year in the market, which will also help power portfolios in a rising market, as more of your assets are invested for longer.

4. Regular investing

For those who don’t have a lump sum to invest every April, there’s the perhaps more common way of investing, which is to do so each month.

As you'll be drip-feeding money in gradually, in some months, when the market has risen the amount you're investing will buy you fewer shares.

But when the market has fallen, the same amount will buy you more shares. This so-called ‘Pound Cost Averaging’ can help smooth out stock market volatility.

Find out more about the benefits of regular investing

5. Leave your money untouched

Leaving your ISA untouched and reinvesting returns is crucial to growing your wealth. This is because through the magic of compounding your investments can grow faster – so long as you have plenty of time on your side.

In simple terms, when you invest your money it will hopefully increase in value and you’ll earn a positive return most years. Assuming it does, after the first year, both the original capital and the return will benefit from any further returns in the second year. In the third year your investment is further enhanced by any returns achieved, and so on. This snowball effect is known as compounding. It's the earliest ISA contributions that have the opportunity to benefit most from compound growth over time.

Discover more about the magic of compounding

6. Setting targets

You don’t need to reach a million to be a successful investor. And not everyone is in the fortunate position to be able to invest the full £20,000 ISA allowance each year – but it doesn’t hurt to reach for the stars. Indeed, investment goals are an important driver for reaching targets.

Having a goal can help motivate you to keep investing regularly and to focus on the long term.

Barclays Money Plan

If you’d like more information on this subject, why not have a listen to episode 13 of our Money Plan podcast? In this episode, Barclays’ Clare Francis discusses the growing number of ISA millionaires and what you can do to get yourself on the road by using as much of your ISA allowance as possible each year and getting your money working as hard as possible.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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