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    • capital0ne
    • By capital0ne 12th Oct 17, 11:49 PM
    • 22Posts
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    capital0ne
    ISA Millionaires
    • #1
    • 12th Oct 17, 11:49 PM
    ISA Millionaires 12th Oct 17 at 11:49 PM
    You read about the odd few people who have £1M plus in an ISA, but how many are there? Reading this forum there seem to be fair few contributors with quite a few thousands in s stocks and shares ISA, it would be useful to share with us your approach and how you did it.
Page 1
    • bowlhead99
    • By bowlhead99 13th Oct 17, 6:48 AM
    • 6,740 Posts
    • 12,009 Thanks
    bowlhead99
    • #2
    • 13th Oct 17, 6:48 AM
    • #2
    • 13th Oct 17, 6:48 AM
    If you had been maxing out your annual allowances since the start, getting a fixed rate of return from the investments each year, the return would have needed to be about 9% to get you there by end of this tax year:

    year ; amount added at start of year; value brought forward from end of last year ; 9% growth on the b/f and added amounts; value at end of year

    1987/88 2,400 0,000 216 2,616
    1988/89 3,000 2,616 505 6,121
    1989/90 4,800 6,121 983 11,904
    1990/91 6,000 11,904 1,611 19,516
    1991/92 6,000 19,516 2,296 27,812
    1992/93 6,000 27,812 3,043 36,855
    1993/94 6,000 36,855 3,857 46,712
    1994/95 6,000 46,712 4,744 57,456
    1995/96 6,000 57,456 5,711 69,167
    1996/97 6,000 69,167 6,765 81,932
    1997/98 6,000 81,932 7,914 95,846
    1998/99 6,000 95,846 9,166 111,013
    1999/00 7,000 111,013 10,621 128,634
    2000/01 7,000 128,634 12,207 147,841
    2001/02 7,000 147,841 13,936 168,776
    2002/03 7,000 168,776 15,820 191,596
    2003/04 7,000 191,596 17,874 216,470
    2004/05 7,000 216,470 20,112 243,582
    2005/06 7,000 243,582 22,552 273,135
    2006/07 7,000 273,135 25,212 305,347
    2007/08 7,000 305,347 28,111 340,458
    2008/09 7,200 340,458 31,289 378,947
    2009/10 7,200 378,947 34,753 420,900
    2010/11 10,200 420,900 38,799 469,900
    2011/12 10,680 469,900 43,252 523,832
    2012/13 11,280 523,832 48,160 583,272
    2013/14 11,520 583,272 53,531 648,323
    2014/15 15,000 648,323 59,699 723,022
    2015/16 15,240 723,022 66,444 804,706
    2016/17 15,240 804,706 73,795 893,741
    2017/18 20,000 893,741 82,237 995,977

    n.b. the amounts pre 1999 were from investing in a general Personal Equity Plan, the predecessor to S&S ISA. I have ignored the further £3k a year that could have been put in single-company PEPs which might have produced spectacular gains for their owners (or total loss) and also ignored the amounts that could have been put in cash TESSAs which could also be rolled into ISAs following their introduction. Anyone using those other allowances and later converting to ISAs would have found it even easier to hit the million.

    An alternative way of hitting the million would have been to max out your allowances from the start of PEPs up to the 2014/15 year, investing really badly to produce a terrible return of 0% net of costs and management fees each and every year for 27 years, but leaving you with £200k accumulated; then moved £149k of it into cash ISAs and invested the other £51k in the initial public offering of Fever Tree Drinks in November 2014 because you were a real fan of their tonic water.

    The Fever Tree shares (2196p yesterday from 134p at launch) would now be worth £852k and your £149k cash ISA (plus interest thereon) would comfortably take you over the million, despite your terrible performance for the first quarter century of your investing career.

    I'll have a G&T if you're buying...
    • Malthusian
    • By Malthusian 13th Oct 17, 9:37 AM
    • 3,070 Posts
    • 4,450 Thanks
    Malthusian
    • #3
    • 13th Oct 17, 9:37 AM
    • #3
    • 13th Oct 17, 9:37 AM
    I put my ISA allowance each year in a moronic momentum strategy promoted by the Daily Telegraph, and as a result I have a £7.19 billion fortune sitting in my HL ISA, all tax free.

    There's no substitute for hard work, people.
    • talexuser
    • By talexuser 13th Oct 17, 11:42 AM
    • 2,263 Posts
    • 1,735 Thanks
    talexuser
    • #4
    • 13th Oct 17, 11:42 AM
    • #4
    • 13th Oct 17, 11:42 AM
    I read in the Sunday Times quite a few years ago there were some ISA millionaires. However the Telegraph now reckon there are ISA 5 million pots (which surprised me!):
    http://www.telegraph.co.uk/investing/isas/family-could-have-built-2m-tax-free-investment-pot/
    (at end)

    and an example of retiring at 39, even though stopped putting money in since 2000:
    http://www.telegraph.co.uk/investing/isas/isa-millionaire-beat-warren-buffett-earn-six-figure-income-life/
    • Malthusian
    • By Malthusian 13th Oct 17, 12:54 PM
    • 3,070 Posts
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    Malthusian
    • #5
    • 13th Oct 17, 12:54 PM
    • #5
    • 13th Oct 17, 12:54 PM
    and an example of retiring at 39, even though stopped putting money in since 2000:
    http://www.telegraph.co.uk/investing/isas/isa-millionaire-beat-warren-buffett-earn-six-figure-income-life/
    Originally posted by talexuser
    It should be emphasised that that was the result of what most of us would consider gambling, holding 10-15 individual shares which allowed him to make a return of 28% per annum.

    This is by no means impossible. The problem is that for every Mr Bagria there are a hundred investors who pick the wrong shares, and they don't get articles in the Daily Telegraph.

    That said, he isn't a day-trader (the article says his typical holding period is 2-3 years) and there was a time when a portfolio of 10 to 15 stocks would have been considered pretty diversified (namely the century before last). It's a highly risky approach but it's paid off in his case.
    • bostonerimus
    • By bostonerimus 13th Oct 17, 1:22 PM
    • 969 Posts
    • 498 Thanks
    bostonerimus
    • #6
    • 13th Oct 17, 1:22 PM
    • #6
    • 13th Oct 17, 1:22 PM
    I read in the Sunday Times quite a few years ago there were some ISA millionaires. However the Telegraph now reckon there are ISA 5 million pots (which surprised me!):
    http://www.telegraph.co.uk/investing/isas/family-could-have-built-2m-tax-free-investment-pot/
    (at end)

    and an example of retiring at 39, even though stopped putting money in since 2000:
    http://www.telegraph.co.uk/investing/isas/isa-millionaire-beat-warren-buffett-earn-six-figure-income-life/
    Originally posted by talexuser
    Over the last 30 years I've averaged just over 8% from a basically 60/40 passive indexing approach. For most of that time I was maxing out my tax deferred savings opportunities and also investing after tax. I'm in the US so don't have an ISA, but the maths of aggressive and constant savings and compounding return is the same.
    Misanthrope in search of similar for mutual loathing
    • jimjames
    • By jimjames 13th Oct 17, 1:29 PM
    • 12,095 Posts
    • 10,545 Thanks
    jimjames
    • #7
    • 13th Oct 17, 1:29 PM
    • #7
    • 13th Oct 17, 1:29 PM
    I've been doing some work on compounding and it should be easily achievable. I'm not close to £1m but equally I've not put anywhere near the maximum into ISAs. If I had I think I'd be comfortably over that so it's definitely possible.

    In terms of approach, invest regularly every month into a balanced mix of low cost index trackers and leave the money there long term to compound. Even small amounts can massively add up over the long term.
    Last edited by jimjames; 13-10-2017 at 1:32 PM.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • bostonerimus
    • By bostonerimus 13th Oct 17, 2:06 PM
    • 969 Posts
    • 498 Thanks
    bostonerimus
    • #8
    • 13th Oct 17, 2:06 PM
    • #8
    • 13th Oct 17, 2:06 PM

    In terms of approach, invest regularly every month into a balanced mix of low cost index trackers and leave the money there long term to compound. Even small amounts can massively add up over the long term.
    Originally posted by jimjames
    Yes. The more you can invest the better and the earlier the better too. I got on the investing path early partly because my first employer encouraged it and put 17% of salary into a DC pension. The pension funds were managed by a big insurance company and 30 years later I still have that fund which has compounded at around 6% pa, it will grow by 4.3% this year. I haven't put anything into it for 26 years and 21k back in the early 1990s has grown to over 100k.
    Last edited by bostonerimus; 13-10-2017 at 2:10 PM.
    Misanthrope in search of similar for mutual loathing
    • sorcerer
    • By sorcerer 13th Oct 17, 4:11 PM
    • 807 Posts
    • 383 Thanks
    sorcerer
    • #9
    • 13th Oct 17, 4:11 PM
    • #9
    • 13th Oct 17, 4:11 PM
    Robbie Burns claims to be an ISA millionaire, his website is here http://www.nakedtrader.co.uk/
    • chockydavid1983
    • By chockydavid1983 13th Oct 17, 4:55 PM
    • 443 Posts
    • 248 Thanks
    chockydavid1983
    If you invest close to the yearly allowance for a long enough period with average returns, you would reach it:
    http://www.comparefundplatforms.com/home
    Whether it's necessary to get to a million is another question. For me, somewhere between 1/4 and 1/2 would be enough. I like my job but I would probably then reduce my hours.
    • Archi Bald
    • By Archi Bald 13th Oct 17, 5:34 PM
    • 9,354 Posts
    • 7,412 Thanks
    Archi Bald
    Official ISA stats: https://www.gov.uk/government/statistics/individual-savings-account-statistics

    OP, it would be good if you could post the answer to your question when you have found it - I am sure it's in there somewhere.
    • jimjames
    • By jimjames 13th Oct 17, 8:08 PM
    • 12,095 Posts
    • 10,545 Thanks
    jimjames
    Official ISA stats: https://www.gov.uk/government/statistics/individual-savings-account-statistics

    OP, it would be good if you could post the answer to your question when you have found it - I am sure it's in there somewhere.
    Originally posted by Archi Bald
    Thanks for the link. Lots of interesting data but unfortunately it doesn't seem to show split by total ISA value.

    It does however show the average S&S ISA value is £48,079 across 2.4 million holders of them. 689,000 people have S&S ISAs worth more than £50k compared to 640,000 cash ISA holders with over £50k. It doesn't give max, min or median.
    Last edited by jimjames; 13-10-2017 at 8:10 PM.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Ray Singh-Blue
    • By Ray Singh-Blue 13th Oct 17, 10:49 PM
    • 337 Posts
    • 434 Thanks
    Ray Singh-Blue
    Like Bowlhead points out, the maths say yes. But I suspect it all hinges on your rate of return, and therefore compounding. I'm 43 and have a slight worry that I may run out of years before I hit £1 million, but if so- at least my future grandchildren will be happy with the balance.

    The problem is that for every Mr Bagria there are a hundred investors who pick the wrong shares, and they don't get articles in the Daily Telegraph.
    Originally posted by Malthusian
    (puts hand up as one of the hundred)

    If you had been maxing out your annual allowances since the start, getting a fixed rate of return from the investments each year, the return would have needed to be about 9% to get you there by end of this tax year
    Originally posted by bowlhead99
    Which sounds so easy. And would be, if you could scrub 2001, 2008, 2011... the total return would then be at least 9% annualised, and you could be an ISA millionaire simply by maxing out and indexing. Alas, it is not so simple and those bad years hurt. While we have had 20%+ years like 2016, we have had 20%- years like 2008. The FTSE100 in 1997 was 5136, in 2017 - a full two decades later- it is 7535, only 47% higher.

    Someone with an index tracker & max contributions since 2000 would unlikely be a millionaire, whereas someone with Apple, Google and ARM might be. Those special people who can identify the next AAPL or GOOG may well manage the whole ISA millionaire and Sunday Telegraph thing more quickly.
    ...

    I'll have a G&T if you're buying...
    Originally posted by bowlhead99
    I would love to buy bowlhead99 a G&T, in return for all his or her informative and entertaining posts.
    Last edited by Ray Singh-Blue; 14-10-2017 at 8:27 AM.
    • Thrugelmir
    • By Thrugelmir 13th Oct 17, 10:59 PM
    • 55,533 Posts
    • 48,881 Thanks
    Thrugelmir
    we have had 20%- years like 2008. The FTSE100 in 1997 was 5136, in 2017 - a full two decades later- it is 7535, only 47% higher.
    Originally posted by Ray Singh-Blue
    You are failing to take account of the reinvestment of income. Longer term 60% of returns comes from this source. Not capital growth. Indexes hide the fact that the constituents change at the very least on a quarterly basis.

    One of my favourite examples. As an illustration.

    In 2012 - A Single Share of Coca-Cola Bought for $40 in the 1919 IPO With Dividends Reinvested Is Now Worth $9,800,000 vs $341,545 Without Dividends Reinvested
    Last edited by Thrugelmir; 13-10-2017 at 11:05 PM.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Ray Singh-Blue
    • By Ray Singh-Blue 13th Oct 17, 11:02 PM
    • 337 Posts
    • 434 Thanks
    Ray Singh-Blue
    Not sure. Look at the total return charts. Would someone get to £1m indexing 2000 - 2017 with max ISA contribution?
    • bostonerimus
    • By bostonerimus 14th Oct 17, 12:03 AM
    • 969 Posts
    • 498 Thanks
    bostonerimus

    Which sounds so easy. And would be, if you could scrub 2001, 2008, 2011... the total return would then be at least 9% annualised, and you could be an ISA millionaire simply by maxing out and indexing. Alas, it is not so simple and those bad years hurt. While we have had 20%+ years like 2016, we have had 20%- years like 2008. The FTSE100 in 1997 was 5136, in 2017 - a full two decades later- it is 7535, only 47% higher.

    Someone with an index tracker & max contributions since 2000 would unlikely be a millionaire, whereas someone with Apple, Google and ARM might be. Those special people who can identify the next AAPL or GOOG may well manage the whole ISA millionaire and Sunday Telegraph thing more quickly.
    Originally posted by Ray Singh-Blue
    I've invested in indexes through 1987, 2001, 2008, 2011 and a 60/40 allocation has annualized a bit more than 8%. The level and length of my contributions (30 years) is a factor in my results, but I know that using indexes can get you well past the million pound mark even with four market crashes.
    Misanthrope in search of similar for mutual loathing
    • Ray Singh-Blue
    • By Ray Singh-Blue 14th Oct 17, 9:28 AM
    • 337 Posts
    • 434 Thanks
    Ray Singh-Blue
    I agree Bosternemius, but 1986 was a looooong time ago & that’s why I’d have a slight concern about running out of years before hitting the £1M as an average ISA investor.
    Here’s a back test for an ISA investor who has invested the full allowance every year since 2000 in two index funds: 50% VFINX (stock) and 50% VBMFX (bonds).

    This is the total return each year since 2000:

    Year, VFINX, VBMFX
    2000 -9.1% 11.4%
    2001 -12.0% 8.4%
    2002 -22.1% 8.2%
    2003 28.5% 4.0%
    2004 10.7% 4.2%
    2005 4.8% 2.4%
    2006 15.6% 4.3%
    2007 5.4% 6.9%
    2008 -37.0% 5.0%
    2009 26.5% 5.9%
    2010 15.0% 6.4%
    2011 2.0% 7.6%
    2012 15.8% 4.0%
    2013 32.2% -2.3%
    2014 13.5% 5.8%
    2015 1.3% 0.3%
    2016 11.8% 2.5%

    Here’s the performance of that investor. Beginning in 2000, they contributed the full ISA allowance at the start of every year, incurred total fees of 0.5% each year, and rebalanced once at the end of each year.

    Year; contribution; cumulative contributions; total value.
    2000 7000 7000 7045
    2001 7000 14000 13723
    2002 7000 21000 19187
    2003 7000 28000 30290
    2004 7000 35000 39868
    2005 7000 42000 48312
    2006 7000 49000 60511
    2007 7000 56000 71305
    2008 7200 63200 65615
    2009 7200 70400 84187
    2010 7200 77600 100660
    2011 10200 87800 115600
    2012 10680 98480 138101
    2013 11280 109760 170855
    2014 11520 121280 198974
    2015 15000 136280 214554
    2016 15240 151520 244993

    (the spreadsheet is too busy to post here, so you'll have to take my word for it)

    So that’s OK but, to borrow a turn of phrase from Yoda, a millionaire yet are they not.
    If you take people like me who have managed to underperform the index most years, the situation is even more slow and steady. So respect to them, but I reckon the few ISA millionaires are either old, or unusually successful (a la fever tree), or both.
    • bostonerimus
    • By bostonerimus 14th Oct 17, 2:39 PM
    • 969 Posts
    • 498 Thanks
    bostonerimus
    From 2000 to 2008 you could only put 4k in an S&S ISA so the situation is a little worse. To have reached 1M in an ISA by investing from 2000 to 2016 you'd need an annual return of 20%; possible, but not probable. As pointed out above if you did a PEP from 1987 and then an ISA, with a 9% return you'd be a millionaire right now and that is definitely doable without any amazing trades or stock picks. Getting 9% was relatively easy, the difficult things were to actually having enough spare income to max out contributions and to stay calm and keep investing through the crashes.
    Last edited by bostonerimus; 14-10-2017 at 2:42 PM.
    Misanthrope in search of similar for mutual loathing
    • Thrugelmir
    • By Thrugelmir 14th Oct 17, 2:43 PM
    • 55,533 Posts
    • 48,881 Thanks
    Thrugelmir
    As pointed out above if you did a PEP from 1987 and then an ISA, with a 9% return you'd be a millionaire right now and that is definitely doable without any amazing trades or stock picks.
    Originally posted by bostonerimus
    Why did miselling of Endowment polcies become such an issue in the UK then? If investment returns of 9% were that easy to achieve. Many investors over estimate their own abilities rather than accepting it's down to luck alone.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Eco Miser
    • By Eco Miser 14th Oct 17, 2:48 PM
    • 3,084 Posts
    • 2,849 Thanks
    Eco Miser
    From 2000 to 2008 you could only put 4k in an S&S ISA so the situation is a little worse.
    Originally posted by bostonerimus
    No, £7000, but you had the choice of putting up to £3000 in a cash ISA, which would leave £4000 to go in an S&S ISA.
    Eco Miser
    Saving money for well over half a century
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