Tips from HL's ISA millionaires

Imagine having an ISA worth over £1 million.

You could take a generous income that’s free of UK tax each year, and you would’ve likely saved yourself a fortune in potential capital gains tax.

Sound impossible?

Well despite the restrictions on how much money you can put in, some investors hold ISAs worth over £1 million.

So what are their secrets?

We spoke to three ISA millionaires to learn how they built their wealth. And to discover any tips and tricks.

Please note these investors have been investing for at least 25 years.

We found lots of differences – some preferred buying shares, while others liked the more hands-off approach of placing their money with a trusted fund manager. A couple of our ISA millionaires had changed their strategies over time, while one stuck with the advice of his grandfather.

This article is not personal advice. If you're not sure if an investment is right for you, please ask for advice. Some of our clients have shared what they’ve done in the past, but this shouldn’t be seen as advice. Unlike cash, all investments can fall as well as rise in value so you could make a loss. ISA and tax rules can change and the benefits depend on your personal circumstances.

So, what have these ISA millionaires got in common?

1. Picking investments for the long term (over five years)

‘Investments should be held for the long term’ is said so often it’s easy to ignore. It’s not exactly exciting and the idea of committing to a fund or share for years and years might be scary as its value rises and falls.

Be calm. If you are investing in shares, you should do it for the long term and not worry too much about the short-term noise.

MR C from North Yorkshire, ISA millionaire

You should buy something that if you had to put it away in a box for 10 years and forget about it you would be happy to hold it for those 10 years.

MR M from Essex, ISA millionaire

Although these quotes emphasise investing for the long term, it’s important to keep up to date with how your investments are doing and make sure they’re aligned to meet your objectives.

The range of investments you can hold in an ISA has increased dramatically in recent years. If you’re struggling to pick investments, you might want to look at our ISA investment ideas.

HOW TO BUILD AN INVESTMENT PORTFOLIO

2. Contributing the maximum amount to an ISA each year

It’s the simplest and least secret tip.

Our ISA millionaires encouraged contributing the maximum possible every year.

I use my full ISA allowance each year and put the cash in at the start of every tax year.

MR M from Essex, ISA millionaire

The longer your money’s invested the longer you’ve got to grow your money and take more advantage of the tax benefits of an ISA. The ISA allowance is £20,000 this tax year.

FIND OUT MORE ABOUT STOCKS AND SHARES ISAS

3. Not overtrading

Sometimes not doing something is actually harder than taking action.

Overtrading – buying and selling investments too often – can be costly. It can be tempting to bank profits or to try to take advantage of short-term dips, but in reality being able to time the market is near impossible. Overtrading and trying to predict daily ups and downs can leave you vulnerable to missing out on some of the best days in the market.

I strongly believe actively trading is bad for your portfolio. Depending on the size of the share you buy, you can lose 0.5% every time you trade meaning if you trade that stock twice a year, that’s 1% gone immediately.

MR L from Suffolk, ISA millionaire

Don’t overly worry about timing the market and try not to trade too frequently.

MR M from Essex, ISA millionaire

Regularly checking in on your ISA and resisting the urge to make a few trades might be tough, but it’s often worth it over the long term.

This is because of a phenomenon called ‘volatility clustering’. Basically the ‘good’ days in the market are normally pretty close to the ‘bad’ days – they both occur in periods of market volatility.

Aim to skip the bad patches and you could easily miss out on the potential gains.

IS TRADING TOO OFTEN A COSTLY MISTAKE?

And the other thing they share – their ISA provider, HL

All these ISA millionaires hold their accounts through HL. And they’re not alone. Of course we can’t all become millionaires. But making a start as soon as you can, however small, gives you the best chance of building your wealth over the long-term.

If you’re happy making your own investment decisions and you’d like to open a Stocks and Shares ISA, you can get started online now. The application takes around 10 minutes.

Money in your Stocks and Shares ISA is free from UK income and capital gains tax. And while investing works best over the long term, you can take your money out whenever you need to.

DISCOVER THE HL STOCKS AND SHARES ISA