An investment expert has suggested a way savers can become ISA millionaires. Dan Coatsworth, head of markets at broker AJ Bell, said making £1million with an investment ISA could be a reality in just over 21 years for savers who can put the maximum allowed each year into such an account with a “reasonable” rate of return of 7%.
Mr Coatsworth said: “Becoming an ISA millionaire needn’t be a fantasy if you are diligent with saving and investing. Even though you might have to make some sacrifices along the way, the rewards certainly make it worthwhile.”
He explained that savers investing the full allowance of £20,000 per year in an investment ISA would need to put aside £1,666.66 each month.
The expert said someone putting aside that amount and achieving a 7% investment return after charges would amass £1m after 21 years and 10 months in their ISA.
Mr Coatsworth admitted not everyone can afford to put the full amount into an ISA each year and suggested a “more realistic” sum might be £1,200.
He said: “It would take someone 25 years and nine months to hit £1m in an ISA based on £1,200 monthly contributions and 7% annual investment returns after charges.
“If you’re in your thirties or early forties and feel like it’s time to get serious about investing, these figures could provide the pick-me up you need to form a plan and get going.”
On how to succeed with investing, Mr Coatsworth concluded: “Form a plan, don’t miss a monthly payment into your ISA, and stick with it through good and bad times.
“It’s just like eating healthily and exercising regularly – stick at it, and you could see big results.”
The Financial Conduct Authority (FCA) advises anybody looking to invest to only do so if they can afford to and to make sure they take steps to put their daily financial affairs in order first.
This might include keeping some money in an emergency fund which allows instant access and to clear any debts. The FCA advises people never to invest using a credit card and to make sure they understand the risks involved.
It said: “While most investors like the idea of high returns, they often come with an increased risk of losing your money. With high-risk investments, you should be prepared to lose all of your money.”
The watchdog also urged investors to be wary of financial products that raise expectations of unrealistic returns and that if it sounds too good to be true it’s probably a scam.
More advice on investing can be found at the FCA website.
