The Long Road To ISA Millionaires

Honest reporting on shorter-term trading activity and ideas
will89
Posts: 22
Joined: November 7th, 2016, 9:33 am

The Long Road To ISA Millionaires

Postby will89 » November 15th, 2016, 5:30 pm

The new forum has given me a renewed impetus to note down some of my musings regarding our (Wife & I) portfolios, so I will endeavour to update this post as and when something interesting happens.

Some background: Late 20s, started investing into ISAs in our early 20s but then bought a house, sold all the investments and only started investing again 2 tax years ago (at age 25).

Aim: ISA millionaires (combined total of £1m split across 2 ISAs) by age 40 (2029) assuming all things remain positive regarding ISA tax status etc.

Areas of Interest: The power of compounding, Dividend Investing, HYP, Value Small Caps, Technology, Emerging Markets, John Baron.


So, ISA millionaires by 40, is it realistic? Some napkin musings:
From next year, 2 people can contribute 40k per year, so in our 13 years remaining that is £520,000 of investments. Current value is £68,000, plus another £16k to come before next April's ISA deadline, so that's £604,000 total contributions (520+84). Assuming the ISA limit increases gently over time and we achieve a 'reasonable' growth rate, I think we should be able to get there around the 40 year old mark. The Monevator compound interest calculator tells me we 'only' need an annual growth rate of a tad over 6.2%.


The Plan:
I don't like things to be a muddle, so I'm sticking to an 'investment type' division between the two ISA accounts.

ISA 1 - 'Sharedealing Porfolio'
A combination of HYP (Income) and a selection of Small Caps (Growth).

ISA 2 - Investment Trusts
Targeting growth over income, loosely following some of John Baron's porfolios. Focusing on growth and exposure to areas where individual shares may not offer any (overseas, US tech etc).



Current Holdings & Watchlists:
HYP Holdings:
BATS
CNA
EZJ
GSK
HSBA
IMB
KIE
LGEN
NG.
RDSB
TW.

HYP Watchlist:
VOD
ISAT
CSN
PHNX
SKY
MARS
GNK
BA.

As you can see, the HYP element of the portfolio currently only extends to 11 stocks, which I will seek to increase to the 15/16 mark during the next tax year.


Current Small Cap Holdings:
AVS
G4M
LVD
RBG
SOM

These will likely be 'traded' much more than the LTBH HYP stocks. The rule I am following is that the spend on each Small Cap is roughly 2/3 of what a HYP stock gets: If my average HYP holding is £3k, then I will be spending £2k on each Small Cap.


Investment Trust Holdings (ISA 2)
Henderson Smaller Companies
JPMorgan Mid Cap

European Assets Trust
JPMorgan Japan Smaller Companies
Fidelity China Special Situations

Herald
International Biotechnology Trust
City Natural Resources
Standard Life Euro Private Equity

Standard Life Property Income Trust


Investment Trust Watchlist:
Finsbury Growth & Income Trust

North American Income Trust
F&C Global Smaller Companies

Scottish Mortgage Investment Trust
Golden Prospect Precious Metals

TR Property


As you may see, these are largely split into the areas of 'UK', 'Overseas', 'Specialist' and 'Property', hopefully giving me exposure to areas that ISA 1 and the individual stockholdings do not, with very little overlap.


How's It Going?
I think it's going well. Obviously this is still relatively 'new', but both portfolios are comfortably ahead of the FTSE350TR (which I used as I couldn't find All-Share figures at the time).
Total contributions thus far are a £63.5k, value is just over £68k, with ISA 1's unit value sitting at 11.12 having started at 10 on the 19/2/15, and ISA 2's being slightly behind at 10.85. The FTSE350TR unit value is 10.56.
Dividends received purely from the HYP element of ISA1 are £2400 so far, with a trailing yield of 4.83% for that portfolio. The addition of most of the small-caps has been relatively recent.


What Next?
Fill this year's remaining ISA allowance, as mentioned above.
Continue to add HYP shares to ISA1 during the next tax year, to a target of around 16-18 as a total, then begin to top-up.
Make the most of small-cap opportunities where they arise in ISA1.
Continue to build the IT portfolio in ISA2, with a strong focus on growth and diversification.
Open SIPPs. We are both auto-enrolled, and the 'best' investment choice with the provider overlaps hugely with shares in our HYP, so open SIPPs and buy a world tracker.



Hopefully that's interesting for people, it's been a good exercise to write down my thoughts, and I thought it sensible to add my own experience as thanks for all the hard work that has gone into the new site. As always, criticisms and comments are very welcome, I will strive to update as and when changes take place.

tjh290633
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Re: The Long Road To ISA Millionaires

Postby tjh290633 » November 15th, 2016, 6:43 pm

will89 wrote:So, ISA millionaires by 40, is it realistic? Some napkin musings:
From next year, 2 people can contribute 40k per year, so in our 13 years remaining that is £520,000 of investments. Current value is £68,000, plus another £16k to come before next April's ISA deadline, so that's £604,000 total contributions (520+84). Assuming the ISA limit increases gently over time and we achieve a 'reasonable' growth rate, I think we should be able to get there around the 40 year old mark. The Monevator compound interest calculator tells me we 'only' need an annual growth rate of a tad over 6.2%.

With today's higher limits on subscriptions it should be easy. Since PEPs began in 1987, the maximum that could have ben invested is about £255k, taking into account PEPs, Single Company PEPs and ISAs. I started when PEPs began but was not able to invest the maximum possible. However the value of my holdings has now risen 7-fold. Overall the rate of return has been 10.3%, which has included a few ups and downs in the market. With that rate of return, someone investing the maximum would have about £1.5million.

Progress will not be even, but looking at my return since the end of 2003, I see that it has been over 10%. The results since the end of 1998 are:

Code: Select all

Since        Acc Unit   IRR   
31-Dec-98        5.89    7.99%
30-Dec-99        6.85    7.52%
31-Dec-00        6.70    8.17%
31-Dec-01        6.44    9.03%
31-Dec-02        5.24   11.35%
31-Dec-03        6.40   10.56%
31-Dec-04        7.61    9.89%
30-Dec-05        9.71    8.38%
31-Dec-06       12.28    6.71%
31-Dec-07       12.08    7.69%
31-Dec-08        7.41   15.66%
31-Dec-09       10.24   12.71%
31-Dec-10       12.32   11.47%
31-Dec-11       13.07   12.59%
31-Dec-12       15.80   10.57%
31-Dec-13       19.56    6.31%
31-Dec-14       20.34    7.56%
31-Dec-15       21.42   10.17%

As you can see, it varies a lot, depending on where the market was at the end of the year, hence the end of 1999 was a notable high, as was 2007. I reckon that your target of more than 6.2% should not be difficult.

Note that figures on which this data is based is my HYP calculated as accumulation units, where all income is rolled up inside the unit. This avoids the complication caused by adding new money, which simply buys more units, while withdrawals call for the sale of units.

TJH

will89
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Joined: November 7th, 2016, 9:33 am

Re: The Long Road To ISA Millionaires

Postby will89 » November 17th, 2016, 6:00 pm

Great news tonight, Avesco (AVS) has received a takeover offer that looks very likely to go through at 650p. Bought at 301p a few months ago so delighted tonight. That's a 5% overall boost to ISA1. The long road to ISA millionaires just got a little bit shorter!

Jon46
Posts: 47
Joined: November 4th, 2016, 11:45 am

Re: The Long Road To ISA Millionaires

Postby Jon46 » November 17th, 2016, 7:22 pm

will89 wrote:Great news tonight, Avesco (AVS) has received a takeover offer that looks very likely to go through at 650p. Bought at 301p a few months ago so delighted tonight. That's a 5% overall boost to ISA1. The long road to ISA millionaires just got a little bit shorter!


Well done Will.

I cannot help feeling that going forward, the going will be harder because competition is so much fiercer these days for most firms if nothing else, ie returns are likely to be lower than we got in the first half of the PEP/ISA thirty odd year story. Our IRRs, although fine still, have not been patch on what we achieved in the first thirteen years, for example. So anyone making planning assumptions on future returns should err on the low side imho.

To partially compensate for this of course one can salt away so much more from the taxman these days, that is of course until the likes of Comrad Corbyn start reading these threads too attentively and start to mull on the irresitible temptation to raid around £50k+ of tax free income, in some cases per person in a couple!

I don't see it as an imminent prospect, but I consider it sadly inevitable in the longer run. So my message to the 'brood' has been to salt away as much as you can while you sensibly can.

Jon

Lootman
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Re: The Long Road To ISA Millionaires

Postby Lootman » November 17th, 2016, 7:56 pm

will89 wrote:From next year, 2 people can contribute 40k per year

True, but bear in mind that there are not a huge number of working people who can afford to salt away 40K a year annually, especially in mid-life with mortgages, children etc. You probably need two earners in the household and 150K a year before tax, and perhaps more in London.

I suspect most people who can do that are like me - have good-sized portfolios in taxable accounts and are really just migrating those holdings to a tax-free environment. If the perception grows that the benefits of these contribution levels are mostly the people who least need such tax breaks, then I'd worry that the 40K a year deal may prove to be short-lived.

Jon46 wrote:To partially compensate for this of course one can salt away so much more from the taxman these days, that is of course until the likes of Comrad Corbyn start reading these threads too attentively and start to mull on the irresitible temptation to raid around £50k+ of tax free income, in some cases per person in a couple!

I don't see it as an imminent prospect, but I consider it sadly inevitable in the longer run. So my message to the 'brood' has been to salt away as much as you can while you sensibly can.

As per above, there is no question in my mind that a Corbyn government would take aim at this. In fact, given the Tories "war on BTLs" maybe even they would see it as too easy a target.

You imply that existing ISAs may be grandfathered into the tax breaks even if new contributions were limited or prevented. Usually tax rules are not changed retrospectively but, even so, I would not be surprised if a future government found a way to tax ISAs through the back door, and there are various ways that could be done whilst claiming that they are not retrospectively legislating. (Happy to elucidate upon request).

Personally if Corbyn ever became PM I would immediately become non-resident, and have had plans in place for some time. I don't do socialism. At that point ISAs would become frozen anyway and the question would arise whether to liquidate them tax-free while one can, and relocate the assets. Likewise you cannot mitigate IHT very well as long as those assets remain within an ISA.

So in the doomsday scenario that you conjure up, I think it would be dangerously complacent to believe that what you've stashed away in an ISA is eternally immune from confiscation.

Jon46
Posts: 47
Joined: November 4th, 2016, 11:45 am

Re: The Long Road To ISA Millionaires

Postby Jon46 » November 17th, 2016, 8:55 pm

Lootman

What on earth am I 'conjuring up', it certainly is not a 'doomsday scenario', bearing in mind the rise of populism we are witnessing, a possible scenario at least?

As to the form any 'attack' on ISAs would take, I made no predictions as to what might develop, just shared what I asked our children and grandchildren to consider doing for themselves while they can(most do both SIPP and ISA, a couple of youngsters sadly show no interest in investing for their future at all, now those two I am more worried about than they will ever know).

You seem to assume a great deal more from what I wrote that I ever intended.

My main point was about my personal fear that future returns might very well be much less than we achieved before the turn of the century.

Jon

PS We both, my wife and I, reached those 'milestones' some years ago. The main reason, much more than investing knowledge, was the early and continuous/relentless way we were financially able to go about it.

tabhair
Posts: 13
Joined: November 4th, 2016, 4:07 pm

Re: The Long Road To ISA Millionaires

Postby tabhair » November 18th, 2016, 10:25 pm

Looks like everyone and their dog had Avesco (except me!), well done!

AdamB
Posts: 12
Joined: November 5th, 2016, 12:54 pm

Re: The Long Road To ISA Millionaires

Postby AdamB » November 20th, 2016, 1:35 pm

Tsk I held AVS a year or two ago and decided to exit. Oh well.

Regarding the topic of this thread, i agree with the earlier comments that the ISA millionaire thing is substantially easier than a few years ago. The real challenge in achieving it today doesn't relate to investment returns at all - as the opening poster said, he needs to make 6% p.a..

The main challenge is being able to stash away £40k p.a. which very few couples / families can do. In order to put away £40k then assuming a 45% tax rate and 2% NI, then that's £75k of pre-tax earnings. So you probably two people with decent jobs and then living a somewhat frugal life and/or not have kids.

Its great that the ISA limit has gone up, however the number of people which can benefit from it is very low.

AdamB
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Joined: November 5th, 2016, 12:54 pm

Re: The Long Road To ISA Millionaires

Postby AdamB » November 20th, 2016, 1:35 pm

Tsk I held AVS a year or two ago and decided to exit. Oh well.

Regarding the topic of this thread, i agree with the earlier comments that the ISA millionaire thing is substantially easier than a few years ago. The real challenge in achieving it today doesn't relate to investment returns at all - as the opening poster said, he needs to make 6% p.a..

The main challenge is being able to stash away £40k p.a. which very few couples / families can do. In order to put away £40k then assuming a 45% tax rate and 2% NI, then that's £75k of pre-tax earnings. So you probably two people with decent jobs and then living a somewhat frugal life and/or not have kids.

Its great that the ISA limit has gone up, however the number of people which can benefit from it is very low.

TopOnePercent
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Re: The Long Road To ISA Millionaires

Postby TopOnePercent » November 28th, 2016, 10:34 pm

Lootman wrote:Personally if Corbyn ever became PM I would immediately become non-resident, and have had plans in place for some time.



Without wishing to divert into politics, how realistic is becoming non-resident for a UK born person? I can readily pull off all manner of corporate vanishing acts, but I'm at something of a loss as to how to become non-resident without disappearing to some distant corner of the globe forever.

rgifford
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Joined: November 4th, 2016, 10:20 am

Re: The Long Road To ISA Millionaires

Postby rgifford » November 29th, 2016, 9:09 am

TopOnePercent wrote:Without wishing to divert into politics, how realistic is becoming non-resident for a UK born person? I can readily pull off all manner of corporate vanishing acts, but I'm at something of a loss as to how to become non-resident without disappearing to some distant corner of the globe forever.


Weren't the non-dom rules changed in the autumn statement this year so that it is now far more difficult to achieve? I didn't follow the headline/bullet point but do remember there being something on this topic.

Lootman
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Re: The Long Road To ISA Millionaires

Postby Lootman » November 29th, 2016, 2:04 pm

rgifford wrote:
TopOnePercent wrote:Without wishing to divert into politics, how realistic is becoming non-resident for a UK born person? I can readily pull off all manner of corporate vanishing acts, but I'm at something of a loss as to how to become non-resident without disappearing to some distant corner of the globe forever.

Weren't the non-dom rules changed in the autumn statement this year so that it is now far more difficult to achieve? I didn't follow the headline/bullet point but do remember there being something on this topic.

There are changes to non-dom taxation happening from April 2017, described here:

https://www.burges-salmon.com/news-and- ... ing-ahead/

On a casual reading, most of the changes appear to apply to non-dom foreigners who live in the UK and pay UK tax on their foreign income only on a remittance basis. The sense of non-dom for UK citizens who leave the UK is more a matter of losing UK domicile for the purpose of no longer being liable for UK inheritance tax.

TopOnePercent was asking about becoming non-resident rather than non-domiciled and, fortunately, that is much easier and more straightforward. Basically it involves living in another country for a tax year whereupon you should be able to successfully claim to be non-resident for tax purposes. You can even spend up to a month in the UK each year and remain non-resident. There are some exceptions but this is all a little off-topic here to go into details.

Getting back to the topic, if someone becomes non-resident then one can no longer subscribe to ISAs, but can retain the ISA funds one already has.

idpickering
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Re: The Long Road To ISA Millionaires

Postby idpickering » November 29th, 2016, 3:44 pm

Hi will89,

What a great opening post in this thread. Thanks for being so open about your plans. I wish you well with them, and am sure you will achieve your aim. Keep us updated with your progress please.

Regards,

Ian.

will89
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Re: The Long Road To ISA Millionaires

Postby will89 » November 30th, 2016, 9:24 am

idpickering wrote:Hi will89,

What a great opening post in this thread. Thanks for being so open about your plans. I wish you well with them, and am sure you will achieve your aim. Keep us updated with your progress please.

Regards,

Ian.



Thanks Ian, one quick update, LVD was sold after the first takeover bid was received, in hindsight should have held for another week but not too fussed. 40% gain in a couple of months.

Funds were redirected into top-ups of RBG and BATS. The HYP component of ISA1 is now largely balanced, only BATS was a long way under median, which has now been remedied, so I will be looking to add something soon. VOD, CSN/PHNX and GNK are on my watchlist.

Interestingly, due to the 2 takeovers of LVD and AVS in the portfolio, the unit value has shot up from 10.88 on the 11/11 to 12.06 today.

idpickering
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Re: The Long Road To ISA Millionaires

Postby idpickering » November 30th, 2016, 11:33 am

will89 wrote:
idpickering wrote:Hi will89,

What a great opening post in this thread. Thanks for being so open about your plans. I wish you well with them, and am sure you will achieve your aim. Keep us updated with your progress please.

Regards,

Ian.



Thanks Ian, one quick update, LVD was sold after the first takeover bid was received, in hindsight should have held for another week but not too fussed. 40% gain in a couple of months.

Funds were redirected into top-ups of RBG and BATS. The HYP component of ISA1 is now largely balanced, only BATS was a long way under median, which has now been remedied, so I will be looking to add something soon. VOD, CSN/PHNX and GNK are on my watchlist.

Interestingly, due to the 2 takeovers of LVD and AVS in the portfolio, the unit value has shot up from 10.88 on the 11/11 to 12.06 today.


Thanks for the update will89. I must admit to having a soft spot for tobacco shares particularly. I hold both BATS and IMB, and they form 10.16% in value of my HYP. I have toyed with GNK, but am struggling to justify it's addition. At 24vholdings I think I'm diversified enough.

Regards,

Ian.

will89
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Re: The Long Road To ISA Millionaires

Postby will89 » November 30th, 2016, 5:32 pm

You may have noticed from the HYP holdings that I largely try and avoid companies with large pension deficits (although I sometimes fail at this)... I know interest rates my rise long-term and this will help alleviate this issue, but it's just a big warning flag for me personally. It's put me off things like BA., BT-A, RMG etc before, and affects what ends up on my watchlist. To be honest, I don't feel overly confident about picking HYP shares at the moment, nothing screams buy to me, but then I just have to tell myself to think about the income and the very long term view.

YeeWo
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Re: The Long Road To ISA Millionaires

Postby YeeWo » December 1st, 2016, 8:13 am

Jon46 wrote:PS We both, my wife and I, reached those 'milestones' some years ago. The main reason, much more than investing knowledge, was the early and continuous/relentless way we were financially able to go about it.
Jon46, Please can you elaborate? Thanks!

Jon46
Posts: 47
Joined: November 4th, 2016, 11:45 am

Re: The Long Road To ISA Millionaires

Postby Jon46 » December 2nd, 2016, 12:10 pm

YeeWo wrote:
Jon46 wrote:PS We both, my wife and I, reached those 'milestones' some years ago. The main reason, much more than investing knowledge, was the early and continuous/relentless way we were financially able to go about it.
Jon46, Please can you elaborate? Thanks!

Well, I am having trouble with this site.

I spent half an hour at least, while logged in of course, typing along private message to you, in response, went to post it, the system asked me to login (again), and my message had gone.

This morning, I typed in a detailed board message on your asking for help on a portfolio management tool. A generic type of post on how to transform a dumb spreadsheet into a slick and so much more versatile database-like tool by using tables, pivots and slicers. I spent over an hour typing this, same thing happened again, the system seemed to forget I was logged in, lost the lot.

In future will prepare a doc off board of course, but this is a bug surely. At my age don't have the energy today to do this again!

Sorry

Jon

gbjbaanb
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Re: The Long Road To ISA Millionaires

Postby gbjbaanb » December 3rd, 2016, 11:57 pm

Jon46 wrote:I spent half an hour at least, while logged in of course, typing along private message to you, in response, went to post it, the system asked me to login (again), and my message had gone.


Get Firefox. I've been in the same situation, click a link, the site says "meh". With FF, clicking the back button often takes you back where you were in the (now cached) history, and your text is right there in the box you typed it out in. I don't know if its a feature, or a "feature", but I don't care. Saved my hair on a couple of occasions now.

will89
Posts: 22
Joined: November 7th, 2016, 9:33 am

Re: The Long Road To ISA Millionaires

Postby will89 » December 5th, 2016, 4:14 pm

I topped up ISA 1 today with it's final chunk of 2015/16 ISA allowance, which has given me enough to add 2 HYP shares, I have decided upon GNK as the first, and am undecided between PHNX/CSN, VOD and ISAT as the second, any thoughts?


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