Don’t make these ISA mistakes if £1m is your goal
Don’t make these ISA mistakes if £1m is your goal
Individual Savings Accounts (ISAs) are fabulous tools for helping boost our wealth. They just make saving and investing easier, with their generous £20k contribution allowances and tax advantages that span from when we’re building wealth to drawing it down.
Lots of us are appreciating their benefits. Around 20 million Brits hold nearly £1 trillion across the different types of ISA - the main two being Cash ISAs and Stock & Shares ISAs1.
Hitting an ISA portfolio value of £1m is a rare but increasingly attainable prize. At last count in April 2023, the UK had just under 5,100 ISA millionaires. Today, this is likely to be much higher as stockbrokers report soaring ISA millionaire numbers on their platforms, with AJ Bell noting a 74%2 rise over the last year alone, and interactive investor a 79% rise3.
Naturally, we can be prone to bad habits – including some preventing us from maximising our chances of reaching that magical £1m mark. Here’s five to avoid.
1) Choosing cash when investing may serve us better
Longer timeframes to our financial goals offer us a little wiggle-room to take risks in our portfolios (as long financial circumstances allow and we’re comfortable in taking them).
This is because time gives our investments the space to ride out the natural dips in value that come with stock market investing, reducing our chances of losses over the long run.
Yet many of us appear unwilling to invest in the pursuit of higher rewards: around two thirds of ISA holders – 13.4m people – hold cash-only ISAs1. While there is nothing wrong with taking a lower risk approach, particularly if we need to draw on our ISAs in the not-too distant future, hitting the dreamy £1m mark means we’re probably going to need to take some investment risks to generate sufficient enough returns. Bear in mind that government figures show that 94% of ISA millionaires are stocks & shares ISA holders4.
There’s also a gender investing gap according to government figures, with 29% of women choosing stocks & shares ISAs over cash versus 41% of men – a gap that’s particularly wide when women are young and may have longer timeframes to invest1.
Cash is also held in high levels by parents using Junior ISAs, who may have up to 18 years to invest, or even longer if their children can be persuaded to see the value in keeping their investments when their JISAs convert to adult ISAs on their 18th birthdays1.
2) Timing the market
It’s tempting to wait for dips in the market to invest. On the surface it makes sense: surely buying the same assets at cheaper prices must result in better long term returns? In truth the numbers don’t really support this.
Charles Schwab examined how much wealth was accumulated by different strategies investing in the S&P 500 each year over a 20-year timeframe, across 80 different rolling periods5.
They found that perfectly timing the market and investing at its lowest point each year - which would be near impossible to achieve in practice - only marginally beat an approach of simply getting on with it and investing on the first trading day of the year, regardless of the value of the market. Drip-feeding cash into the market via monthly investing came in a close third. It demonstrates that it’s time in the market, not timing the market, that matters most to our long-term returns.
3) Ignoring costs
The allure of lofty returns is all very well and good, but costs are the only outcome that’s guaranteed. Small differences in fees – including platform fees, fund/investment fees, or trading costs - can significantly impact long-term returns as the power of compounded costs works against us. Keeping them as low as possible is an easy way to boost our returns.
4) Not using enough of our allowance
Clearly, we need to stash away enough cash to have sufficient firepower to get us over the £1m line. But making estimations on how much for how long can be tricky given the uncertainties attached to investment returns. Nonetheless, AJ Bell have explored some scenarios using past IA sector returns across a few different markets and strategies.
The full £20k ISA allowance works out as £1,666.66 per month, which equates to fairly sizeable savings. As such the model explores how long it would take to reach £1m by investing a more reasonable amount of £1,200 every month, or £14,000 per year.
This is for illustrative purposes only, with returns net of investment management fees but not other potential charges such as account or trading fees. The outcomes are also determined by the starting date of the 1st January 2000 and could differ significantly with different dates. And please remember that past performance is in no way guaranteed in the future6.
As perhaps to be expected, the fast-growing emerging economies of China and India did particularly well, as did North America. Investing with a global approach also proved effective, hitting the £1m mark at the end of 2023, with Europe hot on its heals just three months later.
5) Under-allocating to investment trusts
If we lift the lid on the types of investments in ISA millionaire portfolios it reveals some interesting contrasts in allocations to non-millionaire ISA portfolios, and where they may have the edge, as interactive investor recently explored. As can be seen below, the biggest contrast was allocations to investment trusts, which were held in much higher percentages versus broader ISA portfolios, with regular funds and passives held in much lower percentages.
Given that equity holdings were only a tad higher, they show that ISA millionaires weren’t necessarily taking a lot more stock-specific risk, but perhaps preferring investment trusts over funds and passives, and still choosing to remain diversified. What’s more, the most popular investment for ISA millionaire investors on ii’s platform, across all of the instruments mentioned above, was Alliance Witan3.
AJ Bell found a similar proclivity for investment trusts over funds amongst their ISA millionaires, with Alliance Witan the second most popular investment trust holding7.
1 https://www.ajbell.co.uk/group/news/isas-unpacked-uk-nears-ps1-trillion-market (accessed 5 March 2026)
2 https://www.ajbell.co.uk/group/news/who-are-aj-bells-isa-super-investors-2026. (accessed 5 March 2026)
3 https://www.ii.co.uk/analysis-commentary/79-rise-isa-millionaires-interactive-investor-over-last-year-ii538270 (accessed 5 March 2026)
4 https://moneyage.co.uk/94-of-uks-isa-millionaires-built-wealth-using-stocks-and-share-accounts.php?utm_source=chatgpt.com (accessed 5 March 2026)
5 https://www.schwab.com/learn/story/does-market-timing-work (accessed 5 March 2026)
6 https://www.ajbell.co.uk/group/news/ps1-million-isa-journey-ways-hit-jackpot-through-investing (accessed 5th March 2026)
7 https://www.ajbell.co.uk/group/news/revealed-under-bonnet-aj-bells-isa-super-investor-portfolios (accessed 5 March 2026)
This is a financial promotion that has been approved for issue to UK Retail Clients, by Towers Watson Investment Management Limited (TWIM), authorised and regulated by the Financial Conduct Authority, (FRN 446740). Please refer to the KID and any other relevant documentation before making any final investment decisions. TWIM is the Alternative Investment Fund Manager (AIFM) for Alliance Witan PLC. TWIM is part of Willis Towers Watson. Alliance Witan PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office, River Court, 5 West Victoria Dock Road, Dundee DD1 3JT.
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