Got a credit card? use our Credit Card & Finance Calculators
Thanks to gvonge,Shelford,GrahamPlatt,gpadsa,Steffers0, for Donating to support the site
Becoming an ISA Millionaire
-
- Posts: 14
- Joined: November 4th, 2016, 4:07 pm
Becoming an ISA Millionaire
Is there anyone else out there who has become fascinated by the concept of becoming an ISA millionaire. Have we got any ISA millionaires on this forum? Like many, I've devoured the writings of the likes of Lord Lee (How to Become a Millionaire Slowly), Guy Thomas (Free Capital), and Leon Boros in this Sharesoc e-book detailing how he managed the feet. I was inspired and this year I finally got serious about putting some money to work to achieve this goal Should anyone be interested, I am documenting my progress (http://www.tabhair.com). My strategy is to invest in individual companies, in particular, companies that might have hit a little trouble, or are maybe out of vogue at the time of my investment. I am definitely gravitating towards the side of value (low P/B, low P/E) so far, but I think if I saw the right growth company get priced fairly, I would buy them too. I am very concentrated at the moment (I only own three shares), but I am hoping I can buy some new shares as funds become available (alas, I am still a wage slave). After taking a kicking from Brexit, things have dramatically turned around (thanks Barclays) and I am nicely up at the moment. Of course, the entire market is up, and there are undoubtedly plenty of market collapses to come.
Appreciate any thoughts, advice, or suggestions!
Appreciate any thoughts, advice, or suggestions!
-
- Lemon Quarter
- Posts: 1120
- Joined: November 8th, 2016, 7:32 am
- Has thanked: 12 times
- Been thanked: 454 times
Re: Becoming an ISA Millionaire
tabhair
It's really just time. Anyone investing the full amount in PEP's and then ISA's since 1987 should be a millionaire, or close as damn it;
http://www.isaco.co.uk/blog/bid/130086/ ... illionaire
With the big increase in annual ISA limits it shouldn't take that long in future, assuming you have the means to invest the full amount of course!
BoE
It's really just time. Anyone investing the full amount in PEP's and then ISA's since 1987 should be a millionaire, or close as damn it;
http://www.isaco.co.uk/blog/bid/130086/ ... illionaire
With the big increase in annual ISA limits it shouldn't take that long in future, assuming you have the means to invest the full amount of course!
BoE
-
- The full Lemon
- Posts: 19123
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 646 times
- Been thanked: 6791 times
Re: Becoming an ISA Millionaire
Bubblesofearth wrote:It's really just time. Anyone investing the full amount in PEP's and then ISA's since 1987 should be a millionaire
As it happens, I have contributed the maximum since PEPs started about 30 years ago. The one exception is the single-company PEPs, which I did subscribe to but later sold off when a property investment opportunity came up and I needed cash and couldn't get a mortgage. (One great thing about ISAs is that you can raise a lot of cash quickly without paying tax, if the need arises).
Its value is about half a million so evidently all my investment efforts have done me less good than had I stuck all the money in an index fund and then ignored it. I think some of the reasons for this under-performance, other than just bad decisions obviously, may inform those who aspire to do better over the next 30 years:
1) I used this iSA for the securities I held for wealth preservation. These included bonds, absolute return funds and multi-asset funds. These typically under-perform equities in the long-term because they trade growth for a lower degree of risk.
2) My portfolio of high-yield mostly-UK shares were in my ISA, to shelter their dividends from tax, and they typically grow at a slower rate or, in quite a few cases, actually lost money. My growth portfolio was in a taxable account
3) I'd put any securities that had a more complicated tax treatment in my ISA, like REITs and foreign-registered income securities, to make tax reporting simpler. These were typically not my best performers.
4) When markets fell sharply, I wasn't able to buy more in my iSA because I was already fully-invested, so such purchases happened in my taxable accounts, which did better as a result.
5) I typically populated my iSA each year by selling my biggest winners in my taxable account, and re-purchasing them in my ISA. This had the effect in many cases of buying at the top. For instance, technology shares in 2000 and finance shares in 2008. The pain was doubled by not being able to use those losses for tax purposes.
So if I were starting now, I'd use ISAs for growth shares, particularly smaller companies and AIM shares. Because over the years I've gone from having an income tax problem to having a capital gains tax problem. I was too focused on saving small amounts of income tax and by the time CGT became a problem, it was too expensive to switch things around.
And it's really just a handful of high-growth winners that power your portfolio. You want the likely contenders to be able to grow tax-free.
-
- Lemon Quarter
- Posts: 1120
- Joined: November 8th, 2016, 7:32 am
- Has thanked: 12 times
- Been thanked: 454 times
Re: Becoming an ISA Millionaire
Lootman wrote:As it happens, I have contributed the maximum since PEPs started about 30 years ago. The one exception is the single-company PEPs, which I did subscribe to but later sold off when a property investment opportunity came up and I needed cash and couldn't get a mortgage. (One great thing about ISAs is that you can raise a lot of cash quickly without paying tax, if the need arises).
Its value is about half a million so evidently all my investment efforts have done me less good than had I stuck all the money in an index fund and then ignored it.
Actually you've done OK. Looking back at my link the million was for a couple investing full amounts so half a million is about right for a single person.
BofE
-
- The full Lemon
- Posts: 19123
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 646 times
- Been thanked: 6791 times
Re: Becoming an ISA Millionaire
Bubblesofearth wrote:Actually you've done OK. Looking back at my link the million was for a couple investing full amounts so half a million is about right for a single person.
OK, I feel better now. I figured it was an OK result because the total contributions are probably around 200K or so, and the weighted average duration is maybe 15 years. That would imply a compounded annual return of about 7% or so. Not great but not bad either.
My wife has an ISA as well with a similar amount invested, so your numbers add up.
Let's just hope that ISAs are allowed to endure and retain their tax benefits. I've made a conscious decision to fund ISAs rather than pension schemes on the basis of those benefits.
-
- Lemon Slice
- Posts: 494
- Joined: November 4th, 2016, 2:24 pm
- Has thanked: 2 times
- Been thanked: 98 times
Re: Becoming an ISA Millionaire
Yes, the wife's at about £480,000. i think she missed the first two or three peps that had t be in a single company and were about £2,000 - £2,500 (1988/1989, maybe). She also may have missed one or two others over the years, but no more. She's been in I&G ITs. My ISA is worth about £430,000, but I have been mainly in HYP type shares. I think she had an extra £10,000 from a TESSA, but even so it's made me wonder whether to quit the crack cocaine of HYP and surrender to one of those Luni baskets, supplemented by some infrastructure, bonds and property.
Both of us were hammered by entrusting several TESSAs to Killik in 1999-2001 when they were internet crackers. They managed to lose us 90% of at least two TESSAs. Stuffed full of Marconi, Vocalis, Baltimore, Kewill, Psion and other favourites of their brokers at the time (some of whom have since made partner I'm sad to say.)
With the new allowance of £20,000 and a moderate wind, I reckon we'dl hit the million in maybe 7 years time. However we're now in drawdown of at least half the dividends, so maybe the chance has gone - especially as a bear market must be nearby after 8 years of stella growth.
Both of us were hammered by entrusting several TESSAs to Killik in 1999-2001 when they were internet crackers. They managed to lose us 90% of at least two TESSAs. Stuffed full of Marconi, Vocalis, Baltimore, Kewill, Psion and other favourites of their brokers at the time (some of whom have since made partner I'm sad to say.)
With the new allowance of £20,000 and a moderate wind, I reckon we'dl hit the million in maybe 7 years time. However we're now in drawdown of at least half the dividends, so maybe the chance has gone - especially as a bear market must be nearby after 8 years of stella growth.
-
- Lemon Slice
- Posts: 424
- Joined: November 5th, 2016, 10:12 am
- Has thanked: 297 times
- Been thanked: 118 times
Re: Becoming an ISA Millionaire
Code: Select all
Year | ISA Contribution | 8% Growth
1 | £20,000 | £21,600
2 | £21,000 | £42,600
3 | £22,050 | £64,650
4 | £23,153 | £87,803
5 | £24,310 | £112,113
6 | £25,526 | £137,638
7 | £26,802 | £164,440
8 | £28,142 | £192,582
9 | £29,549 | £222,131
10 | £31,027 | £253,158
11 | £32,578 | £285,736
12 | £34,207 | £319,943
13 | £35,917 | £355,860
14 | £37,713 | £393,573
15 | £39,599 | £433,171
16 | £41,579 | £474,750
17 | £43,657 | £518,407
18 | £45,840 | £564,248
19 | £48,132 | £612,380
20 | £50,539 | £662,919
21 | £53,066 | £715,985
22 | £55,719 | £771,704
23 | £58,505 | £830,210
24 | £61,430 | £891,640
25 | £64,502 | £956,142
26 | £67,727 | £1,023,8691
Assumptions: -
- a 5% increase in the amount of the ISA allowance every year.
- 8% p.a. aggregate growth in value of the portfolio each year. (i.e. Capital Value plus Dividends All being re-invested).
I have copies of both the Guy Thomas and John Lee books. I get the impression John Lee is pretty much using the ISA wrapper to harvest CGT savings from his wider portfolio. Guy Thomas' book is really interesting in that it goes into the personality traits which seem to characterise people who can save so much money through their working lives. The scary fact is, in the context of being financially secure in old age, £1million isn't really all that large an amount of money. Pension investing is very much an overlap of this subject also!
-
- Lemon Slice
- Posts: 424
- Joined: November 5th, 2016, 10:12 am
- Has thanked: 297 times
- Been thanked: 118 times
17 NOT 26 Years! Last Table WRONG
Code: Select all
| Running | ISA | Plus 8%
| Net Total | Contrib. | Growth
1 | | £20,000 | £21,600
2 | £21,600 | £21,000 | £46,008
3 | £46,008 | £22,050 | £73,503
4 | £73,503 | £23,153 | £104,388
5 | £104,388 | £24,310 | £138,993
6 | £138,993 | £25,526 | £177,681
7 | £177,681 | £26,802 | £220,841
8 | £220,841 | £28,142 | £268,902
9 | £268,902 | £29,549 | £322,327
10 | £322,327 | £31,027 | £381,622
11 | £381,622 | £32,578 | £447,336
12 | £447,336 | £34,207 | £520,066
13 | £520,066 | £35,917 | £600,462
14 | £600,462 | £37,713 | £689,229
15 | £689,229 | £39,599 | £787,133
16 | £787,133 | £41,579 | £895,009
17 | £895,009 | £43,657 | £1,013,760
Assumptions: -
- a 5% increase in the amount of the ISA allowance every year.
- 8% p.a. aggregate growth in value of the portfolio each year. (i.e. Capital Value plus Dividends All being re-invested).
-
- Posts: 1
- Joined: November 15th, 2016, 2:35 pm
Re: Becoming an ISA Millionaire
tabhair
I posted back in June on the Fool that I had reached £1 million in ISA investments (split between myself and my spouse).
http://boards.fool.co.uk/invested-my-wa ... 83410.aspx
As others have said, I think the most important thing is to contribute the most you can afford to every year. I started keeping detailed notes on the portfolio back in 2004 when I had about £15k in my self-select ISA (with more money in cash ISAs and some managed PEPs). There were some years where capital growth was very low (only one negative year so far fortunately) but I kept adding and the benefit of compounding has really come through (I included a list of all my contributions in the Fool post linked above).
As I mentioned in the Fool post, I ran a much more concentrated and small-cap focused portfolio in the early years, so I completely get where you are coming from. However, that does require a degree of good luck (or at the very least, the avoidance of bad luck) as a couple of bad/mistimed/unlucky decisions can mean a big hit to portfolio value.
These days I run a much more diverse portfolio mainly invested in collectives. Now of course that doesn't protect me from a general market downturn but it does greatly reduce the day-to-day individual stock risk.
By way of update on the portfolio, I dropped a few percent immediately post Brexit but have since seen a rapid recovery and new highs in portfolio value. As of today, the portfolio stands at £1.118m, a gain of c.17% for the year.
I posted back in June on the Fool that I had reached £1 million in ISA investments (split between myself and my spouse).
http://boards.fool.co.uk/invested-my-wa ... 83410.aspx
As others have said, I think the most important thing is to contribute the most you can afford to every year. I started keeping detailed notes on the portfolio back in 2004 when I had about £15k in my self-select ISA (with more money in cash ISAs and some managed PEPs). There were some years where capital growth was very low (only one negative year so far fortunately) but I kept adding and the benefit of compounding has really come through (I included a list of all my contributions in the Fool post linked above).
As I mentioned in the Fool post, I ran a much more concentrated and small-cap focused portfolio in the early years, so I completely get where you are coming from. However, that does require a degree of good luck (or at the very least, the avoidance of bad luck) as a couple of bad/mistimed/unlucky decisions can mean a big hit to portfolio value.
These days I run a much more diverse portfolio mainly invested in collectives. Now of course that doesn't protect me from a general market downturn but it does greatly reduce the day-to-day individual stock risk.
By way of update on the portfolio, I dropped a few percent immediately post Brexit but have since seen a rapid recovery and new highs in portfolio value. As of today, the portfolio stands at £1.118m, a gain of c.17% for the year.
-
- The full Lemon
- Posts: 19123
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 646 times
- Been thanked: 6791 times
Re: Becoming an ISA Millionaire
toofast2live wrote:Yes, the wife's at about £480,000. i think she missed the first two or three peps that had t be in a single company and were about £2,000 - £2,500 (1988/1989, maybe).
It wasn't that the first few PEPs needed to be in a single company but rather that they could only be invested in companies, as opposed to funds and bonds. I believe there was a lower contribution level if you wanted only funds. So to maximise your contributions you needed to buy shares directly, and in fact PEPs were specifically designed to encourage direct investment rather than collective investment.
The "single company PEP" was an additional contribution allowance which could only be invested in one single company per year. As I recall this enabled an annual contribution of 6K versus 3K for an ordinary PEP and maybe 600 for a fund PEP.
-
- Lemon Half
- Posts: 8358
- Joined: November 4th, 2016, 11:20 am
- Has thanked: 926 times
- Been thanked: 4201 times
Re: Becoming an ISA Millionaire
Lootman wrote:Bubblesofearth wrote:It's really just time. Anyone investing the full amount in PEP's and then ISA's since 1987 should be a millionaire
As it happens, I have contributed the maximum since PEPs started about 30 years ago. The one exception is the single-company PEPs, which I did subscribe to but later sold off when a property investment opportunity came up and I needed cash and couldn't get a mortgage. (One great thing about ISAs is that you can raise a lot of cash quickly without paying tax, if the need arises).
Its value is about half a million so evidently all my investment efforts have done me less good than had I stuck all the money in an index fund and then ignored it. I think some of the reasons for this under-performance, other than just bad decisions obviously, may inform those who aspire to do better over the next 30 years:
1) I used this iSA for the securities I held for wealth preservation. These included bonds, absolute return funds and multi-asset funds. These typically under-perform equities in the long-term because they trade growth for a lower degree of risk.
2) My portfolio of high-yield mostly-UK shares were in my ISA, to shelter their dividends from tax, and they typically grow at a slower rate or, in quite a few cases, actually lost money. My growth portfolio was in a taxable account
3) I'd put any securities that had a more complicated tax treatment in my ISA, like REITs and foreign-registered income securities, to make tax reporting simpler. These were typically not my best performers.
4) When markets fell sharply, I wasn't able to buy more in my iSA because I was already fully-invested, so such purchases happened in my taxable accounts, which did better as a result.
5) I typically populated my iSA each year by selling my biggest winners in my taxable account, and re-purchasing them in my ISA. This had the effect in many cases of buying at the top. For instance, technology shares in 2000 and finance shares in 2008. The pain was doubled by not being able to use those losses for tax purposes.
So if I were starting now, I'd use ISAs for growth shares, particularly smaller companies and AIM shares. Because over the years I've gone from having an income tax problem to having a capital gains tax problem. I was too focused on saving small amounts of income tax and by the time CGT became a problem, it was too expensive to switch things around.
And it's really just a handful of high-growth winners that power your portfolio. You want the likely contenders to be able to grow tax-free.
I'm surprised that you only have half a million. My estimate is that, had I invested in everything going, including single company PEPs, I would have subscribed about £255k and would now have topside of a million. As it is I didn't and I haven't, but looking at it very crudely, I have about 7 times the amount that I have contributed since 1987 up to 2007, when I started making occasional withdrawals.
It strikes me that your choice of investments inside your ISA is probably the reason for underperformance. I have only invested in equities, always dividend-paying and usually at or above the market average. The IRR over the 29 years has been just over 10%. Again we come back to the theory that you get a higher total return from reinvesting higher dividends than we do from doing the same with so-called growth shares. Really we should classify them as lower yielding shares.
I don't think it is the handful of high fliers that matter so much as the abject failures. I have a list of the IRRs of all the shares I currently hold and also of those sold, taken over, or virtually vanished. In the case of those still held, I list the date first bought, while in those sold, I list the date first bought and the date of final disposal.
Code: Select all
Tinkered 1 share
EPIC Share IRR IRR Since
ADM Admiral Group plc 16.37% 15.65% 05-Mar-14
AV. Aviva plc 3.55% 7.25% 26-Oct-10
AZN AstraZeneca plc 15.63% 9.12% 01-Jun-93
BA. BAe Systems plc 12.58% 5.91% 26-Nov-99
BATS British American Tobacco plc 15.45% 15.45% 19-Feb-10
BLND British Land plc 2.70% 10.02% 01-Oct-10
BLT BHP Billiton plc -1.98% -1.57% 19-Feb-10
BP. BP plc 12.69% 10.96% 09-Nov-79
BT.A BT Group plc 13.27% 20.09% 28-Nov-84
CLLN Carillion plc -9.13% -9.40% 27-Apr-16
CPG Compass Group plc 13.73% 8.79% 31-Jan-01
DGE Diageo plc 16.00% 16.00% 06-May-09
GSK GlaxoSmithKline plc 9.57% 9.27% 28-Sep-10
IMI IMI plc 43.40% 12.22% 30-Mar-09
IMT Imperial Tobacco Group plc 22.41% 10.05% 01-Oct-96
INDV Indivior plc 42.20% 101.00% 23-Dec-14
KGF Kingfisher plc 8.27% 9.41% 04-Sep-07
LGEN Legal & General Group plc 29.19% 25.65% 14-Jun-16
LLOY Lloyds Banking Group plc 18.49% 10.52% 22-Dec-88
MARS Marstons plc 12.13% 10.59% 17-Feb-11
MKS Marks & Spencer plc 10.89% 11.63% 09-Feb-70
NG. National Grid Transco plc 15.03% 10.55% 20-Oct-00
PSON Pearson plc 2.10% 4.23% 22-Oct-09
RB. Reckitt Benckiser Group plc 18.67% 18.48% 21-Mar-11
RDSB Royal Dutch Shell plc B 7.58% 6.61% 07-Jun-06
RIO Rio Tinto plc 86.75% 855.82% 27-Apr-16
S32 South32 Ltd 33.69% 23.15% 18-May-15
SGRO Segro plc 3.02% 0.14% 04-Sep-07
SMDS DS Smith plc 15.43% 9.25% 08-Feb-07
SSE Scottish & Southern Energy plc 10.84% 11.14% 28-Sep-10
TATE Tate & Lyle plc 13.61% 3.11% 21-Jul-99
TSCO Tesco plc 9.63% 7.59% 19-Jun-97
TW Taylor Wimpey plc 3.44% -5.84% 30-Aug-05
ULVR Unilever plc 11.37% 11.37% 19-Feb-10
UU. United Utilities Group plc 10.28% 9.28% 09-Aug-01
VOD Vodafone Group plc 11.89% 10.96% 16-Aug-06
WMH William Hill plc 10.79% 0.56% 05-Mar-08
and for those sold, in order of disposal:
Code: Select all
Share IRR Since Until Days Held
CNA Centrica plc -97.24% 17-Feb-97 06-Mar-97 17
Energy Energy Group 34.42% 24-Feb-97 05-Jun-98 466
ALLD Allied Domecq plc 115.52% 21-Jul-99 27-Jul-00 372
Syngenta Syngenta AG -92.88% 13-Nov-00 23-Nov-00 10
BCI Blue Circle Industries plc 20.74% 21-Jul-99 25-Jul-01 735
OOM O2 161.82% 19-Nov-01 20-Dec-01 31
MONI Marconi 7.67% 24-Aug-89 21-Nov-02 4,837
BAY British Airways plc -33.69% 21-Jul-99 17-Jan-03 1,276
SXC Six Continents plc, formerly Bass plc 3.86% 05-Oct-99 15-Apr-03 1,288
IHG Intercontinental Hotels Group plc 35.51% 17-Apr-03 30-Aug-05 866
PILK Pilkington plc 10.53% 18-Jan-80 07-Mar-06 9,545
BG. BG Group plc 15.80% 08-Dec-86 07-Jun-06 7,121
BOC BOC Group plc 11.69% 26-May-87 07-Jun-06 6,952
MAB Mitchells and Butler plc 38.20% 17-Apr-03 10-Oct-06 1,272
WTB Whitbread plc 10.77% 06-Aug-98 31-Oct-06 3,008
SPW Scottish Power plc 10.99% 18-Jun-98 08-Feb-07 3,157
HNS Hanson plc 11.75% 26-May-87 30-May-07 7,542
SCTN Scottish & Newcastle plc 30.20% 10-Oct-06 23-Nov-07 409
ICI Imp.Chem.Ind.plc 10.64% 09-Feb-70 02-Jan-08 13,841
SGC Stagecoach Holdings plc 22.32% 21-Jul-99 05-Mar-08 3,150
CBRY Cadbury Schweppes plc 11.40% 26-May-87 04-Apr-08 7,619
HBOS HBOS plc 4.69% 02-Jun-97 05-Jun-08 4,021
THUS Thus Group plc 30.78% 20-Mar-02 15-Oct-08 2,401
MAY Mapeley Ltd -88.99% 30-May-07 20-Mar-09 3,355
DSGI DSG International plc -37.46% 24-Feb-06 06-May-09 1,167
TNI Trinity Mirror plc -10.95% 23-Nov-07 22-Oct-09 699
AAL Anglo American plc 38.04% 09-Oct-08 19-Feb-10 498
PFD Premier Foods plc -46.29% 14-Dec-06 19-Feb-10 1,163
RTO Rentokil Initial plc 0.34% 07-Jun-06 19-Feb-10 1,353
PRU Prudential Corp plc 12.45% 25-Sep-90 18-May-10 7,175
ITV ITV plc -0.51% 14-Feb-97 28-Sep-10 4,974
YULC Yule Catto plc 29.56% 04-Apr-08 28-Sep-10 907
TOMK Tomkins plc 7.63% 31-Oct-06 01-Oct-10 1,431
BRE Brit Insurance Holdings NV 129.25% 18-May-10 26-Oct-10 161
NFDS Northern Foods plc -2.36% 07-Mar-06 17-Feb-11 1,808
CTT Cattles plc -81.53% 05-Jun-08 16-Mar-11 1,014
RSA RSA Insurance Group plc 2.37% -7.04% 21-Jul-99 05-Mar-14 6,225
REX Rexam plc 10.41% 6.88% 19-Jan-04 27-Apr-16 4,582
PFL Premier Farnell plc 10.48% 8.36% 17-Jan-08 14-Jun-16 3,071
The column off to the right is days held, which may help explain the odd strange result. The three odd results in the 4th column are the "single share" results for those shares, which I didn't start looking at until somewhat late in the day.
The big losers have all been setbacks at the time, particularly Marconi, Mapeley and Cattles. Oh for better foresight.
TJH
-
- The full Lemon
- Posts: 19123
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 646 times
- Been thanked: 6791 times
Re: Becoming an ISA Millionaire
tjh290633 wrote:
I'm surprised that you only have half a million. My estimate is that, had I invested in everything going, including single company PEPs, I would have subscribed about £255k and would now have topside of a million. As it is I didn't and I haven't, but looking at it very crudely, I have about 7 times the amount that I have contributed since 1987 up to 2007, when I started making occasional withdrawals.
I did subscribe to single company PEPs for the years they were available but later sold them, so I'd guess my total contributions were closer to 200K, maybe 220K. I could get an exact number if I did some research but that number is close enough for my purpose. I hope to make no withdrawals from my iSA and, indeed, to continue to contribute the maximum, as I have taxable accounts with enough funds for my purposes, and will gradually draw those down instead.
tjh290633 wrote:It strikes me that your choice of investments inside your ISA is probably the reason for underperformance. I have only invested in equities, always dividend-paying and usually at or above the market average. The IRR over the 29 years has been just over 10%. Again we come back to the theory that you get a higher total return from reinvesting higher dividends than we do from doing the same with so-called growth shares. Really we should classify them as lower yielding shares.
The big losers have all been setbacks at the time, particularly Marconi, Mapeley and Cattles. Oh for better foresight.
No doubt and, as noted, my IRR is more like 7%, so clearly your foresight was better than mine. If I may attribute a couple of other factors to your success, I'd cite two observations.
Firstly, you had a system and you stuck to it, although I'm sure it was refined over time. I was all over the place with my strategies, particularly in the first few years of PEPS which were also my first few years of investing.
Secondly, you keep impeccable records and, in my experience, the best investors and traders keep very meticulous records. Again, as is obvious, I really don't and lack the patience and attention to detail that requires. That record-keeping shows you what works and what does not, and enables you to better attribute success and articulate it to others
-
- Posts: 14
- Joined: November 4th, 2016, 4:07 pm
Re: Becoming an ISA Millionaire
Lootman wrote:Bubblesofearth wrote:It's really just time. Anyone investing the full amount in PEP's and then ISA's since 1987 should be a millionaire
As it happens, I have contributed the maximum since PEPs started about 30 years ago. The one exception is the single-company PEPs, which I did subscribe to but later sold off when a property investment opportunity came up and I needed cash and couldn't get a mortgage. (One great thing about ISAs is that you can raise a lot of cash quickly without paying tax, if the need arises).
Its value is about half a million so evidently all my investment efforts have done me less good than had I stuck all the money in an index fund and then ignored it. I think some of the reasons for this under-performance, other than just bad decisions obviously, may inform those who aspire to do better over the next 30 years:
1) I used this iSA for the securities I held for wealth preservation. These included bonds, absolute return funds and multi-asset funds. These typically under-perform equities in the long-term because they trade growth for a lower degree of risk.
2) My portfolio of high-yield mostly-UK shares were in my ISA, to shelter their dividends from tax, and they typically grow at a slower rate or, in quite a few cases, actually lost money. My growth portfolio was in a taxable account
3) I'd put any securities that had a more complicated tax treatment in my ISA, like REITs and foreign-registered income securities, to make tax reporting simpler. These were typically not my best performers.
4) When markets fell sharply, I wasn't able to buy more in my iSA because I was already fully-invested, so such purchases happened in my taxable accounts, which did better as a result.
5) I typically populated my iSA each year by selling my biggest winners in my taxable account, and re-purchasing them in my ISA. This had the effect in many cases of buying at the top. For instance, technology shares in 2000 and finance shares in 2008. The pain was doubled by not being able to use those losses for tax purposes.
So if I were starting now, I'd use ISAs for growth shares, particularly smaller companies and AIM shares. Because over the years I've gone from having an income tax problem to having a capital gains tax problem. I was too focused on saving small amounts of income tax and by the time CGT became a problem, it was too expensive to switch things around.
And it's really just a handful of high-growth winners that power your portfolio. You want the likely contenders to be able to grow tax-free.
Lootman, thank you for your extremely helpful and detailed post. Luckily for me, between having kids, a wife and mortgage to fund, I don't have to worry about having to balance investments inside and outside of taxable accounts. If I can get the full £20k allowance saved into my ISA each year, that is going to be as much new funds as I will be able to add in a year.
I agree that getting good companies that have decent growth prospects and allowing them to do their thing is absolutely critical. Unfortunately, when I look at the market today, it's just incredibly hard to find these sort of companies at fair prices. That is why I've been drawn into the rather more murkier world of the financials. Banks in particular are absolutely despised investments, but they are cheap, often trading below tangible book value, and at a single digit earnings ratio to normalised earnings.
-
- Posts: 14
- Joined: November 4th, 2016, 4:07 pm
Re: Becoming an ISA Millionaire
sg1580 wrote:tabhair
I posted back in June on the Fool that I had reached £1 million in ISA investments (split between myself and my spouse).
http://boards.fool.co.uk/invested-my-wa ... 83410.aspx
As others have said, I think the most important thing is to contribute the most you can afford to every year. I started keeping detailed notes on the portfolio back in 2004 when I had about £15k in my self-select ISA (with more money in cash ISAs and some managed PEPs). There were some years where capital growth was very low (only one negative year so far fortunately) but I kept adding and the benefit of compounding has really come through (I included a list of all my contributions in the Fool post linked above).
As I mentioned in the Fool post, I ran a much more concentrated and small-cap focused portfolio in the early years, so I completely get where you are coming from. However, that does require a degree of good luck (or at the very least, the avoidance of bad luck) as a couple of bad/mistimed/unlucky decisions can mean a big hit to portfolio value.
These days I run a much more diverse portfolio mainly invested in collectives. Now of course that doesn't protect me from a general market downturn but it does greatly reduce the day-to-day individual stock risk.
By way of update on the portfolio, I dropped a few percent immediately post Brexit but have since seen a rapid recovery and new highs in portfolio value. As of today, the portfolio stands at £1.118m, a gain of c.17% for the year.
Thanks for the response and congratulations on your fantastic achievement. You have basically done what I am trying to do now. To start with at least, run a relatively concentrated portfolio (if I owned 8-10 companies, I would be happy with that), hopefully try to attain decent returns and has the portfolio grows, I can start moving it into more stable companies like Diageo, Unilever, etc.
-
- Posts: 14
- Joined: November 4th, 2016, 4:07 pm
Re: Becoming an ISA Millionaire
tjh290633 wrote:Code: Select all
Share IRR Since Until Days Held
CNA Centrica plc -97.24% 17-Feb-97 06-Mar-97 17
Energy Energy Group 34.42% 24-Feb-97 05-Jun-98 466
ALLD Allied Domecq plc 115.52% 21-Jul-99 27-Jul-00 372
Syngenta Syngenta AG -92.88% 13-Nov-00 23-Nov-00 10
BCI Blue Circle Industries plc 20.74% 21-Jul-99 25-Jul-01 735
OOM O2 161.82% 19-Nov-01 20-Dec-01 31
MONI Marconi 7.67% 24-Aug-89 21-Nov-02 4,837
BAY British Airways plc -33.69% 21-Jul-99 17-Jan-03 1,276
SXC Six Continents plc, formerly Bass plc 3.86% 05-Oct-99 15-Apr-03 1,288
IHG Intercontinental Hotels Group plc 35.51% 17-Apr-03 30-Aug-05 866
PILK Pilkington plc 10.53% 18-Jan-80 07-Mar-06 9,545
BG. BG Group plc 15.80% 08-Dec-86 07-Jun-06 7,121
BOC BOC Group plc 11.69% 26-May-87 07-Jun-06 6,952
MAB Mitchells and Butler plc 38.20% 17-Apr-03 10-Oct-06 1,272
WTB Whitbread plc 10.77% 06-Aug-98 31-Oct-06 3,008
SPW Scottish Power plc 10.99% 18-Jun-98 08-Feb-07 3,157
HNS Hanson plc 11.75% 26-May-87 30-May-07 7,542
SCTN Scottish & Newcastle plc 30.20% 10-Oct-06 23-Nov-07 409
ICI Imp.Chem.Ind.plc 10.64% 09-Feb-70 02-Jan-08 13,841
SGC Stagecoach Holdings plc 22.32% 21-Jul-99 05-Mar-08 3,150
CBRY Cadbury Schweppes plc 11.40% 26-May-87 04-Apr-08 7,619
HBOS HBOS plc 4.69% 02-Jun-97 05-Jun-08 4,021
THUS Thus Group plc 30.78% 20-Mar-02 15-Oct-08 2,401
MAY Mapeley Ltd -88.99% 30-May-07 20-Mar-09 3,355
DSGI DSG International plc -37.46% 24-Feb-06 06-May-09 1,167
TNI Trinity Mirror plc -10.95% 23-Nov-07 22-Oct-09 699
AAL Anglo American plc 38.04% 09-Oct-08 19-Feb-10 498
PFD Premier Foods plc -46.29% 14-Dec-06 19-Feb-10 1,163
RTO Rentokil Initial plc 0.34% 07-Jun-06 19-Feb-10 1,353
PRU Prudential Corp plc 12.45% 25-Sep-90 18-May-10 7,175
ITV ITV plc -0.51% 14-Feb-97 28-Sep-10 4,974
YULC Yule Catto plc 29.56% 04-Apr-08 28-Sep-10 907
TOMK Tomkins plc 7.63% 31-Oct-06 01-Oct-10 1,431
BRE Brit Insurance Holdings NV 129.25% 18-May-10 26-Oct-10 161
NFDS Northern Foods plc -2.36% 07-Mar-06 17-Feb-11 1,808
CTT Cattles plc -81.53% 05-Jun-08 16-Mar-11 1,014
RSA RSA Insurance Group plc 2.37% -7.04% 21-Jul-99 05-Mar-14 6,225
REX Rexam plc 10.41% 6.88% 19-Jan-04 27-Apr-16 4,582
PFL Premier Farnell plc 10.48% 8.36% 17-Jan-08 14-Jun-16 3,071
I am seriously impressed that you managed to hold ICI for 38 years. I have held Barclays (my first share in my ISA) for just 7 months and while it's done extremely well (mostly because I had the stomach to buy more when it cratered after Brexit), I have the overwhelming urge to sell some of it and take profits. Selling would be ridiculous though. My thesis that I wrote in my blog was to hold the shares for the two full years with the expectation that management would deliver on the turnaround. The turnaround is meeting my expectations, therefore it'd be incredibly foolish for me to sell only 1/4 of the way through.
-
- Lemon Half
- Posts: 8358
- Joined: November 4th, 2016, 11:20 am
- Has thanked: 926 times
- Been thanked: 4201 times
Re: Becoming an ISA Millionaire
tabhair wrote:tjh290633 wrote:Code: Select all
Share IRR Since Until Days Held
ICI Imp.Chem.Ind.plc 10.64% 09-Feb-70 02-Jan-08 13,841
I am seriously impressed that you managed to hold ICI for 38 years.
Actually I inherited them from my mother who bought them when she sold her house about 10 years previously. She also left me MKS and Brooke Bond Liebig. I have hung on to MKS but BBL were taken over by Unilever and in retrospect I should have bought ULVR with the money.
TJH
-
- The full Lemon
- Posts: 19123
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 646 times
- Been thanked: 6791 times
Re: Becoming an ISA Millionaire
Last week my ISA (briefly) passed the £1,000,000 mark. This caused me to look back at this topic from almost exactly 5 years ago where I noted that my ISA at that time was worth half a million.
Given that contributions since then have been £100,000 (5 times £20,000) that assumes an uplift in value of £400,000 due to gains and dividends.
Overall this is not a stellar investment performance. But what it does tell me is that it does not have to be. A fairly mundane investment return can still get you there as long as you contribute as much as you can every year, avoid making withdrawals, and let time do the rest.
Now just hoping that the rules don't change on me.
Given that contributions since then have been £100,000 (5 times £20,000) that assumes an uplift in value of £400,000 due to gains and dividends.
Overall this is not a stellar investment performance. But what it does tell me is that it does not have to be. A fairly mundane investment return can still get you there as long as you contribute as much as you can every year, avoid making withdrawals, and let time do the rest.
Now just hoping that the rules don't change on me.
-
- Lemon Quarter
- Posts: 1943
- Joined: June 21st, 2017, 12:02 am
- Has thanked: 256 times
- Been thanked: 963 times
Re: Becoming an ISA Millionaire
This thread made me check!
Between Mrs Spet and I, we have £1.1m in ISAs. I think I’ve put in the maximum every year since about 1999 and she since about 2006.
Between Mrs Spet and I, we have £1.1m in ISAs. I think I’ve put in the maximum every year since about 1999 and she since about 2006.
-
- Lemon Quarter
- Posts: 4891
- Joined: November 4th, 2016, 10:15 am
- Has thanked: 620 times
- Been thanked: 2725 times
Re: Becoming an ISA Millionaire
My wife's and my ISA have both crossed that amount, (combined value today 2,170k). I agree that making sure you put the maximum in every year is the main thing (use it or lose it!). We didn't do single company PEPs initially but otherwise have subscribed fully. There have been some stellar performers (Scottish Mortgage and buying builders when they were bombed out in the GFC - eg Barratt at 46p was good timing.) and also some stellar losers eg banks were catastrophic. Overall though they have done well
As has been pointed out on other topics, they are a great incentive to hold on to your assets so that the taxman can take 40% IHT eventually!
ps a million is worth only a fraction of what it was in 1987!
As has been pointed out on other topics, they are a great incentive to hold on to your assets so that the taxman can take 40% IHT eventually!
ps a million is worth only a fraction of what it was in 1987!
-
- Lemon Quarter
- Posts: 4466
- Joined: November 8th, 2016, 11:14 pm
- Has thanked: 1622 times
- Been thanked: 1619 times
Re: Becoming an ISA Millionaire
Some of our family investments are also in Child Trust Funds and recently SIPPs, but totalled with wife's and my ISAs they are getting close to the million mark. We contributed until 2013; since then we have been net drawing down and now have withdrawn about 170k more than we ever put in [no day job since 2006 and three kids].
So you can actually get there without contributing and can even take significant withdrawals. Not paying tax helps a lot.
GS
So you can actually get there without contributing and can even take significant withdrawals. Not paying tax helps a lot.
GS
Return to “Trading my way to a million”
Who is online
Users browsing this forum: No registered users and 7 guests