There were some 131 fewer ISA millionaires using the interactive investor (ii) platform by the end of 2022 compared with a year earlier, with the total dropping from 983 to 852.
Results from the UK’s second largest fund shop show that investors with more than £1m saved in an ISA are typically more aggressive than their peers, with half the amount of cash (5.2%) as regular savers (9.7%). This is despite their age, with the average millionaire 17 years older than the average ISA investor (73 versus 56 years old).
The biggest difference, however, is their use of investment trusts, which make up 42.5% of the average millionaire portfolio, compared with 24.2% for the average ii customer.
Conversely, they use funds less, with just 8.2% invested in open-ended strategies, compared with 22.3% for all ISA owners.
Dzmitry Lipski, head of funds research at interactive investor, said: “It’s no surprise to see investment trusts take up such a large proportion of customer portfolios. Over the long term, some unique features such as gearing (borrowing) to enhance returns have helped them deliver strong long-term returns overall.
“Over time, that might mean that they start to account for a larger percentage of a portfolio. Some investors might consider rebalancing, particularly if a very adventurous investment trust is suddenly taking up a big share of the pie due to outperformance.”
However, it may have been a hinderance last year, he noted, as this also means they can underperform in a falling market. Also, because they are listed on the stock market, trusts are also more affected by sentiment.
The most popular holding among ISA millionaires – Alliance Trust – fell 5.6% last year, while the third most popular holding (Scottish Mortgage) was down 45.7%.
Total return of trusts in 2022
Source: FE Analytics
FTSE blue chips make up the remainder of the top 10, with the likes of Shell, GlaxoSmithKline and Haleon rounding out the top-five holdings.
How to become an ISA millionaire
Lipski said that the age of these investors implies that most people will have to get rich slowly. Starting today, if you were able to invest the full £20,000 annual ISA allowance each year and it grew by 5% each year after fees (roughly the long-run average of stock markets), it would take 25 years to reach the £1m mark.
Myron Jobson, senior personal finance analyst at ii, said there are other tips that can help, including when these investors put their money away.
Around half, for example, do so in the first month of the tax year, rather than the last, giving these investors an additional year in the market compared with those that leave it until the last minute.
“The early bird gets the bigger worm it seems when it comes to ISA investments – that’s because more of your assets are working for you for longer. There will be inevitable market timing risk, and that’s why a long-term view is crucial. But it seems to be working for ISA millionaires,” he said.