ISA Millionaires

jimjames

Archi_Bald wrote: »

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.

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.

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.

Malthusian wrote: »

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.

(puts hand up as one of the hundred)

bowlhead99 wrote: »

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

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.
...

bowlhead99 wrote: »

I'll have a G&T if you're buying...
:beer:

I would love to buy bowlhead99 a G&T, in return for all his or her informative and entertaining posts.

Thrugelmir

Ray_Singh-Blue wrote: »

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.

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

Ray_Singh-Blue

Not sure. Look at the total return charts. Would someone get to £1m indexing 2000 - 2017 with max ISA contribution?

bostonerimus

Ray_Singh-Blue wrote: »

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'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.

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

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.

Thrugelmir

bostonerimus wrote: »

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.

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.

Eco_Miser

bostonerimus wrote: »

From 2000 to 2008 you could only put 4k in an S&S ISA so the situation is a little worse.

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.

bostonerimus

Eco_Miser wrote: »

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.

Like I said "£4000 to go in an S&S ISA".....I didn't bother to say the rest into cash ISA.