Alliance Trust, Scottish Mortgage and the oil majors were some of the most common holdings of ISA millionaires at interactive investor (ii), as the number of seven-figure accounts with the platform soared over the past year.
Interactive investor shared the top 10 most-held instruments by both ISA millionaires and all customers, ranked by number of customer holdings.
Alongside oil majors Shell and BP, other popular FTSE blue chip giants included financials such as Aviva and Lloyds Banking Group, as well as other high dividend paying names such as telecoms provider Vodafone and utility firm National Grid also made the list.
Source: Interactive Investor
When it comes to their direct equity allocation, there is a clear home bias: ISA millionaires have 88% exposure to the UK, a trend seen across broader ii ISA savers too, which have an average of 86% allocated to the domestic market. ISA millionaires also have a little less exposure to the US versus ii’s wider customer ISA base (11% versus 12%).
When it comes to investment trusts, which have historically tended to be second in terms of popularity, ii’s ISA millionaires have favoured them over open-ended funds and equities.
Investment trusts make up almost half (46%) of their accounts, compared to just 7.6% invested in funds. This was also above their direct equity allocations (38.3%), and far above their exchange-traded-funds or ETF allocations (3.1%).
ISA millionaires at ii also have less in cash, with 4.6% yet to be invested, while the wider customer base at ii held roughly double the amount (8.9%) in cash. The broader investor set also held almost half the amount in investment trusts at 25.5%.
Asset splits
Source: Interactive Investor
Moira O’Neill, head of personal finance at interactive investor said the FTSE 100 blue chips that make up the top holdings of ISA millionaires could help them in the “race against inflation”.
“While it’s inspiring to look at how the very wealthiest have got there, investors need to think about their own risk profiles,” she added. “Investment trusts, for example, often tend to outperform funds in a rising market due to structural advantages such as the ability to gear.
“But in a falling market, these features can also enhance losses. And key to building up those ISA pots is to fully utilise the very generous £20,000 annual ISA allowance, something that only the very fortunate are able to do.”
ISA millionaires were also more regular traders, making 27 trades a year on average, compared to eight average trades across all ii ISAs.
If a saver was to invest the full £20,000 annual ISA allowance now and achieve a 5% annual growth rate excluding fees, it would take 25 years to reach the £1m mark – £1,002,269.08, to be exact.
If a 7% annual growth rate was achieved, one could trim three years off that period, achieving £1,048,722.82 in 22 years. Conversely, if the investment experienced annual growth of 3%, it would take 31 years to reach the seven-figure sum (£1,030,055.17).
“Accumulating £1m in your ISA pot is a long-term game,” O’Neill said. “And even if the one million figure may seem daunting – we can all learn from the UK’s wealthiest savers to help our own investment pots grow.”
The number of ISA millionaires at UK investment platform interactive investor has jumped by over 34% to 983 from 731 last year, according to figures from the company.
It was not clear how much of this increase came from migrations from other platforms and how much was due to growth of the value of investments.
Despite the meaningful rise in ISA millionaires at the platform, O’Neill noted that the average age of the account holders was 72.
“It’s a reminder that investing is a marathon, not a sprint,” she said. “Ask any professional athlete, and they’ll tell you the key to crossing that finish line in one piece, was the consistent, and diligent habits they developed and stuck with in the run up to the event.
“Think of a short-term investment win as a pair of shiny new running shoes – it’s lovely to have, and sometimes it helps longer-term, but it’s mainly the rest, the fuel, and the training along the way – which all adds up in the end.”