So, how can I become an ISA millionaire?
Becoming a millionaire is quite an achievement. Having an ISA means you can reach this in less time because you won’t pay tax on income or capital gains.
With careful planning and some good investment choices, you can become an ISA millionaire. We’ve got some top tips to help you reach this financial goal.
Maximise your contributions
The size of your ISA portfolio depends on how much you invest and how much return you generate. So the more you can invest, the greater your money can grow.
Contributing a small regular sum and choosing the right investments can soon grow your pot. But making sure you use your full ISA allowance per year is the only way to maximise your ISA’s true potential.
Invest as soon as you can
Your investments can’t give you impactful returns unless they have time to grow. The longer your money is invested, the more time it has to grow.
That’s why investing as soon as you can in the tax year is important. As we see in the data from ii ISA Millionaires, nearly half of them are maxing out their ISA allowance in the first month of the tax year.
And the earlier in life you start, the smoother your journey towards becoming an ISA millionaire may be. But there’s no wrong time to start, just make sure you don’t miss out on using any of your annual allowances.
Be consistent, patient and disciplined
The stock market will always rise and fall. It might be tempting to jump ship when the market turns against you, but holding firm might be the better option.
It may seem counter-intuitive at the time, but long-term patience pays. Leaving your money invested and adding to it allows compound interest to build up in your favour.
Few can predict how the market will behave, but committing to ride the high and lows could bring you a better result.
Use dividend reinvestment
Most of the top 10 investments that ii ISA Millionaires held are ones that pay dividends. You can take these dividends out as cash, but reinvesting them back into funds or shares can help grow your pot.
When you invest in funds, you’re given the choice between ‘accumulation’ units and ‘income’ units. Accumulation units automatically reinvest any money earned back into the investment, while income units transfer any growth to you as cash.
If you invest in individual shares, many investment platforms, like ii, offer an automatic dividend reinvestment service. You just need to set it up then let the reinvesting roll on.
The decision to reinvest income will come down to personal circ*mstances, but it can be an effective way of boosting your money’s earning potential – especially over time with compound interest.
Diversify your portfolio
Putting all your eggs in one basket isn’t the best investment strategy. Our own ISA millionaires know this, and it shows in how they’ve diversified their portfolios. Primarily focusing on investment trusts, but also balancing that with other investment types looks to be key to their success.
Remember that this trend is never guaranteed. In fact, the one thing you can be sure of is that there will be rough patches along the way.
There are lots of ready-made funds to get started with that beginner investors might find helpful - like the ii Super 60 or ii ACE 40.
