The road to one million
The road to one million
Perhaps unsurprising following the strong run in US equities over the past few years: the latest figures from HMRC show a record 4,850 Individual Savings Accounts (ISA) holders have more than £1m in their portfolios1.
The generous tax benefits of ISAs undoubtedly help, shielding keen investors from losing large chunks of their returns to the taxman. It makes them the envy of retail investors around the world and increasingly valuable amid a tsunami of tax changes, most recently in October 2024 when capital gains taxes (CGT) rose to 18% for basic rate taxpayers and 24% for higher rate taxpayers.
Some of the major online stockbrokers have been trying to unlock the secrets of the ISA millionaire by examining their portfolios. Interestingly, they have found investment trusts to be a vital part of the puzzle. interactive investor, which holds 1,607 ISA millionaires on its platform, found investment trusts to be the most held financial instrument: representing 41% of ISA millionaire portfolios versus 34% across the wider ISA base2. In particular, Alliance Witan was the number one investment of choice across II’s cohort of ISA millionaires on its platform2.
Jumping in on the excitement, investment trust industry trade body - the Association of Investment Companies (AIC) - has been looking at which of its investment trusts returned more than £1m if the full ISA allowance was invested from 1999 when the ISA was first launched to today. Of the 50 that hit the £1m mark, Alliance Witan is included, having grown a portfolio of £326,560 in contributions to £1,208,4583.
Of course, no one knows what the future holds in stock markets. But here are six tips that might help set you on the road to that coveted one million pounds.
1. Start, NOW
When building stock market wealth, much of the heavy lifting comes from the extraordinary force that is compounding, which grows stronger over time as gains build upon gains. Figures from stockbroker AJ Bell offer some evidence here. They calculate that if you manage to eke out average annual returns of 6% net of fees, then contributions of £429,900 would more than double to £1m over 25 years. What’s more, given compounding’s growing power, to get to £2m you would only need to contribute another £171,960 and give it just ten further years4. It demonstrates that time is by far your best friend in investing. So don’t waste any!
Source: AJ Bell, based on 6% net fund growth per annum (including dividend reinvestments). Numbers do not add to round millions as they have been calculated based on whole years of saving. As of 26 February 2025.
2. Maximise contributions
As our table above shows, you need to be investing £1,433 a month, or near the full annual ISA allowance of £20k, for 25 years in order to be able to hit the £1m mark. Most of us would find this is a fairly hefty chunk of change to be regularly saving each pay day. But compounding works whatever the sum. With £143 a month, AJ Bell calculate that you could get to £300k after 41 years4.
3. Be consistent
Recent volatility reminds us that markets inevitably go through highs and lows. This can cause investors to get the jitters and stop investing, which decimates their returns given the best days in the market often follow the worst. Drip-feeding your money into markets is a good strategy if you’re prone to investing anxiety - reducing any risks associated with market timing, smoothing the price you pay for your investments, and ensuring that you keep the saving and investing habit going.
4. Diversify
Diversified products make up around 60% of interactive investors’ ISA millionaire portfolios, with investment trusts in particular representing nearly 41%2. It reminds us that wealth building is a ‘get rich slow’ game of incremental returns, and while the heady returns of correctly picked stocks are alluring, what goes sharply up may also come sharply down. In the worst of cases, share prices can ultimately go to zero. Diversification offers the shares of lots of different companies to cushion any potential blows in individual positions. In addition, investment trusts such as Alliance Witan utilise professional stock pickers to select the best investment opportunities for the portfolio.
5. Keep costs low
Keeping charges low is important as they are guaranteed to dent your returns, and can do so significantly over long timeframes. Using large investment trusts such as Alliance Witan helps in this regard: it is able to spread investment costs across a large base of investors, keeping the Trust’s ongoing charges low and more of its potential gains in your pocket.
6. Reinvest dividends
Dividends are an important part of an investment’s total returns, but we often don’t need the income until much later on in our lives. Reinvesting them, a process online stockbrokers have made very simple and cheap these days, adds dollops of cash to our investments and can significantly improve performance over time.
1 https://www.fool.co.uk/2024/12/15/there-are-now-4850-isa-millionaires-here-are-the-stocks-and-shares-theyve-been-buying/
2 https://www.ii.co.uk/analysis-commentary/how-and-where-do-ii-isa-millionaires-invest-ii534582
3 https://www.theaic.co.uk/aic/news/press-releases/the-50-investment-trusts-that-would-have-made-you-an-isa-millionaire
4 https://www.ajbell.co.uk/articles/investmentarticles/285934/why-making-your-second-isa-million-25-times-easier-your-first
Issued by Towers Watson Investment Management Limited (TWIM), registered office Watson House, London Road, Reigate, Surrey RH2 9PQ. TWIM is authorised and regulated by the Financial Conduct Authority, firm reference number 44674. 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. Alliance Witan PLC gives no financial or investment advice. © Copyright Alliance Witan PLC. Tel: 01382 928 320.
This information is for informational purposes only and should not be considered investment advice. The views expressed are the opinion of TWIM and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as of end March 2025 and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Information contained herein has been obtained from sources believed to be reliable but not guaranteed.