There’s a select group of ISA holders who are now in the millionaires’ club. And although they have used different underlying investment strategies, they share several investing principles that have helped them grow their stocks and shares ISA into an investment worth over a million. So, let’s see what the rest of us can learn from these super successful investors.
They’re In It For The Long Term
Given recent market volatility, many investors have been getting nervous and thinking about selling shares in their ISAs. What’s notable about the ISA millionaires is that they keep their eyes firmly fixed on the horizon, and don’t worry unduly about periodic market turbulence. They’re all aware that performance can only reliably be measured in the long term, and that ups and downs are to be expected along the way. And by long term, they mean over five years, and preferably ten.
They Don’t Overtrade
It’s interesting how the millionaires’ investment styles have several features that reinforce each other. Along with a long-term perspective, they prefer masterly inactivity to frenetic trading. They find an investment they think is sound, whether that’s a directly bought stock, or a managed fund. And then they keep it. It’s really that simple. This doesn’t mean that they never have a change of strategy. But there must be a very good reason for them to dump one investment and go into another. That means their returns aren’t constantly being eaten into by trading costs and commissions. An article in the Financial Times describes overtrading as motivated by “fretting and dabbling” which is a good description of some overactive traders.
They Put As Much As They Can Into The ISA
To be fair, many of the millionaires have been in the fortunate position of being able to take advantage of the maximum ISA allowance over the years. For many investors, this isn’t possible, especially with a young family. But savers should try to put as much as they can reasonably afford into their ISAs. With a stocks and shares ISA, you can simply leave the dividends and capital gains to accumulate. You can put up to £40,000 into an ISA up to April 5th, 2020, and after the budget, the allowance may rise.
They Never Try To Time The Market
People who try and dump shares when there’s a market dip, in the hope of picking them up cheaply when the market returns, almost never manage to do so. For one thing, markets can rebound very suddenly. For another, once you’re out of the market, you’re not getting dividends. And to get back in, there are trading costs to consider. Our group of super investors never try to outwit the market on timing.
They Ignore Bandwagons
While some of the ISA millionaires occasionally change their investing strategy, they never flock to the latest investment trend, “hot” company, fashionable sector or bitcoin-fuelled IPO. If they have attributes in common, these seem to be patience and level-headedness.