Wouldn’t it be great to become an ISA millionaire? Recent research shows that it’s a dream that many young investors share, and 14% of young people are actively planning to become ISA millionaires.
We take a look at that research and reveal the plans of one ambitious young investor who’s rejected cash and is investing in his stocks and shares ISA with the aim of being able to retire early.
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Matt Roberts’ plan to become an ISA millionaire
Like many young investors, Matt Roberts, a 28-year-old scientific researcher, has ambitious plans. He’s revealed how he’s planning to become a young ISA millionaire long before retirement age. He’s rejected cash savings and is planning to grow his stocks and shares ISA by targeting a bold investment plan.
Matt explains how the Covid-19 pandemic made him reassess his priorities. “Like a lot of young people, I started taking a bigger interest in my finances during lockdown. I wasn’t happy about the returns on offer from my cash savings, so I decided to invest in a stocks and shares ISA instead.”
He’s starting small but is planning to up his contributions as his wage increases. He explains, “Right now, I’ve got just over £20,000 in my pot, and I want to grow that into £1 million. At the moment, I’m paying in £550 monthly, but it would be nice to be able to max out my allowance when I’m older.”
He’s got ambitious growth targets for his investments. He says, “I’m targeting a return of 9% per annum, which might seem ambitious right now with all the volatility there is. But I’m committed to staying invested for the long run. I don’t want to be still working when I’m 65 if I don’t have to, and it would be nice to have the option of retiring early someday.”
Matt’s dream of financial freedom depends on him staying the course. Based on his current pot and contributions, Matt could expect to reach millionaires’ row aged 55. That’s assuming he actually manages to achieve a 9% annual return.
Are Matt’s aims realistic?
But are Matt’s plans to become a stocks and shares ISA millionaire realistic? Let’s crunch the numbers!
A 9% investment return is pretty ambitious and might be unrealistic. But even with a more modest 7% return, it may be possible for Matt to achieve £1 million while he’s still young.
If Matt ups his monthly contributions to £700, he could achieve £1 million by the time he’s 58. That’s assuming he achieves a 7% return on his investment.
If Matt increases his contributions to £1,000 per month, he could hit £1 million by the age of 54.
If he maxes out his ISA allowance and saves £20,000 per year, he could have a cool £1 million in just 21 years, by the age of 49 with 7% returns.
14% of young people aim to become ISA millionaires
Matt’s not the only one thinking big. Recent research shows that more young people than ever are aiming to become ISA millionaires. A poll of 1,000 ISA holders conducted by Freetrade and InvestingReviews revealed that 14% of 18 to 24-year-olds expect to have a £1 million fortune by retirement, compared with 4% across all age brackets.
According to Simon Jones, CEO of Investing Reviews, “It’s reassuring to see there’s a new tribe of young investors who recognise the tremendous wealth-building powers of the stocks and shares ISA.”
How to become an ISA millionaire
The key to growing your investment wealth at any age is consistent, regular investing.
As Dan Lane, senior analyst at Freetrade, explains, “Hitting the seven-figure mark in your stocks and shares ISA is … all about doing the simple stuff well and consistently.” According to Dan, investors should focus on “the basic habits of monthly investing in a diversified portfolio informed by your financial goals.”
He cautions young investors to do their research and be realistic about their investing goals. He explains, “Getting starry-eyed at the big prize and not focusing enough on the groundwork may lead to decisions that are overly informed by short-termism.”
And finally
If you want to know more about how to build your wealth with regular investing, then check out our guide to how stocks and shares ISAs work. If you’re keen to get started on your investing journey, then a good place to start is by checking out our top-rated stocks and shares ISAs.
Don’t leave it until the last minute: get your ISA sorted now!
If you’re looking to invest in shares, ETFs or funds, then opening a Stocks and Shares ISA could be a great choice. Shelter up to £20,000 this tax year from the Taxman, there’s no UK income tax or capital gains to pay any potential profits.
Our Motley Fool experts have reviewed and ranked some of the top Stocks and Shares ISAs available, to help you pick.
Investments involve various risks, and you may get back less than you put in. Tax benefits depend on individual circumstances and tax rules, which could change.
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About the author
Alice is a Suffolk-based personal finance writer specialising in pensions, tax, investment and small businesses. She is a qualified Chartered Accountant and has previously worked for KPMG London and Tesco Plc.
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