Secrets of the wealthy: how to become an Isa millionaire
Harry Brennan talks to two of a select group of people who have grown their Isa to more than £1m
‘Word of mouth can be just as important as a company fact sheet’
Harry Sheldon, 62, had his first lesson in investing in a Seventies classroom. His teacher had finished the syllabus ahead of time and decided to talk to his teenage students about the stock market. Then, for his 15th birthday, Mr Sheldon was given shares in a knitwear company.
They flopped, but almost half a century later Mr Sheldon’s investments have made him a millionaire and allowed him to retire in his 50s. Today he manages money on behalf of his friends, children and elderly relatives for no charge.
He is among a select group of Isa millionaires who have stashed money into the taxfree wrapper over the years. Of the 300,000 people who use Interactive Investor, Britain’s second biggest broker, fewer than 400 have reached this coveted status. And Mr Sheldon did it quicker than most – the average age of Isa millionaires is 72.
Isa millionaires’ most-bought shares include Lloyds, one of the country’s biggest banks; utilities companies privatised under Margaret Thatcher, such as National Grid; and popular investment trusts such as Scottish Mortgage, which is heavily invested in American technology firms. This is according to research by Interactive Investor and rival broker Hargreaves Lansdown.
Mr Sheldon’s first “10-bagger” – an investment that returns 10 times the original stake – was the Miton Diverse Income Trust, which came from investing with Gervais Williams, a veteran stock picker at asset managers Miton Group.
“After an investment seminar I put in £10,000. That was almost 20 years ago. Now the stock is worth around £95,000,” he said.
Other investments, however, have not fared so well. “I put £7,000 into a hairdressing company based in Liverpool called Alan Paul. It went bust. The worst thing was that when I told my sister, who was living in the city, she said she would never have touched it with a bargepole. It goes to show word of mouth can be just as important as a company fact sheet,” he said.
Today Mr Sheldon, with his wife, has more than £1.2m saved in Isas, which he invests using AJ Bell, another broker. Along with his pension, he enjoys an annual income of more than £50,000 a year.
Yet he thinks stock market returns will only just beat inflation over the next few years.
Mary Clugston, 77, another successful Isa investor, built her first portfolio overnight during the Thatcher era of privatisation when she bought up stock in old national infrastructure firms including British Gas, which latter spawned National Grid and Centrica.
Her stock market forays recently allowed her to cash in her profits and buy a cottage near her north Hampshire home, which she now rents to a tenant.
Mrs Clugston’s best investment was buying property developer Galliford Try at the turn of the century. She bought £1,000 of shares for about 21p each. Today, the same shares are worth £1.70 – a more than eight-fold increase.
“But I have had several disasters too,” she said. “Over the years I learnt it’s best to have a stop loss on your investments, so if they go down by a certain amount your broker will sell them for you straight away.”
Both investors said their secret to success was a mix of solid research and holding on to shares for many years – as well as luck.
A person starting today and investing the maximum limit of £20,000 a year into an Isa would take 25 years to turn it into £1m, assuming annual investment returns of 5pc. With annual returns of 3pc, it would take 31 years.