ISA millionaire? The power of picking the right investment

Becoming an ISA millionaire sounds like a long shot, but the statistics show that with the right combination of circumstances, it is possible. If you want to join this elite band of wealthy investors, you need to harness three key factors: time, contribution levels, and persistence. Your investment choices matter too. The BlackRock UK Smaller Companies fund has shown its mettle in building wealth over time.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

If you can get these four factors working in your favour, you could accumulate significant wealth in your ISA. As an approximate guide, you’ll need to be saving the maximum ISA allowance of £20,000 (for 2025/26) for around 20 years, with an annual investment growth rate of 8-9% to get close to the magic £1m number.

This may sound tough, but there is a growing number of ISA millionaires who have achieved it. Over 3,000 lucky investors hold more than £1m in their ISAs. This has tripled in three years. Another 7,000 people in the UK hold ISAs worth between £750,000 and £1 million, while 30,000 have between £500,000 and £750,000, according to analysis by the investment platform InvestEngine.¹

What do ISA millionaires do differently to other investors?

Becoming an ISA millionaire isn’t really about luck (although that helps). In reality, these investors tend to have developed some atomic habits that have helped them build wealth. Importantly, these habits are not only available to those with lots of skill and experience, they can be adopted by anyone.

They use their ISA allowance in full

How much you put in will obviously have an impact on how much you can get out. It is very difficult to build a chunky pot without committing significant savings. The ISA allowance for 20245/26 is a generous £20,000 per year and the majority of ISA millionaires would have invested the full amount each year since the launch of ISAs in 1999.

They are also careful about using their ISA allowance early and in full each year. Data from Hargreaves Lansdown shows that two-thirds of the ISA millionaires on its platform had already topped up their ISA by the end of the calendar year – i.e. three months before the start of the tax year. And over half of them had already put in the maximum £20,000.²

This is a significant commitment from your disposable income, but ISA millionaires will make it a habit and they make their investments as soon as they can to get the ISA tax benefits as early as possible in the tax year.

ISA millionaires invest early

Time in the market is vital. It is perhaps no surprise that the average age of an ISA millionaire is 73³. The impact of compounding builds over time. This is particularly true for ISAs because any capital growth and income from the investments held in an ISA portfolio are free from UK income and capital gains tax. This means investors build without tax exerting a drag on returns. By wrapping investments tax free in an ISA, the compounding effect works much harder for you.

Many of today’s ISA millionaires will have started building their ISA wealth when the product launched in 1999. £10,000 invested in the year 2000 at an indicative return of 7%⁴ would be worth around £57,000 today. The same amount, grown over five years would be worth just £14,100.⁵ Every pound that you can invest early is likely to be more valuable in the long term because of the effects of compounding.⁶

Interactive Investor research showed how much first-time investors at different ages need to invest each year to reach the magic number by age 65. The young have a significant advantage. The platform assumed 5% annual investment growth,⁷ with contributions increasing by 2% per year. A 25-year-old would need to invest £6,000 in the first year, and would make total contributions of £362,400 over time. This rises to an initial contribution of £11,400 by age 35 and £16,400 for a 40-year-old.³ For those over the age of 42, ISA millionaire status becomes more difficult, as they would need to contribute more than the ISA allowance, or see their investments grow much faster than 5% to get to the goal.

ISA millionaires target long-term growth

Longevity and diligent saving each year can only go so far. Investors who had stuck with cash each year would not have got close to the magic £1m level. Over the past decade, the average annual return on stocks and shares ISAs has been 9.64%, while over that same period, the return for a cash ISA has been just 1.21%.⁸ Cash ISAs pay more today, as interest rates have risen, but are still unlikely to grow fast enough to make you an ISA millionaire.

Certain parts of the stock market have offered stronger growth over time. The AIC ISA millionaires list shows that 32 investment trusts would have made investors more than £1 million if they had invested the full annual ISA allowance in the same trust each year. It is no coincidence that 12 of them were smaller companies funds, including the BlackRock Smaller Companies Investment Trust.⁹

Smaller companies may grow faster than their larger peers. They tend to be more agile and can be quicker to take advantage of emerging opportunities. The UK small cap sector is diverse and is a fertile hunting for careful stockpickers.

Roland Arnold, manager of the BlackRock Smaller Companies Investment Trust, is an experienced stockpicker. He has built a strong, long-term track record, by sticking to a disciplined process designed to harness fast-growing businesses, while seeking to manage risks effectively. Roland aims to focus on finding high-quality growth businesses with the ability to generate sustainable long-term growth.

Roland looks to identify ‘hidden gems’ in niche growth areas. In this, he looks for a number of key characteristics: a strong management team with a track record of delivery; market leadership; clear evidence of long-term growth; and good cash generation that funds future growth. Finally, the need to have the financial firepower that can overcome difficult market conditions.

Roland also aims to keep to a strong sell discipline, particularly important for smaller companies. This means taking profits as shares do well and reinvesting should shares underperform. This is important in managing through market volatility.

Roland is supported by BlackRock’s analyst team, which brings excellent market access, close relationships with company management and dedicated stewardship resources. We believe this could put him in the optimal position to deliver long-term capital growth to investors in the trust.

ISA millionaires stay invested

Successful ISA investors do not tend to buy and sell investments all the time. Usually, they plan their ISA portfolio and stick with it. Buying and selling investments costs money, which can eat into your total return.

Also, every investment will go through highs and lows. There will be times when a particular style is out of fashion. This is particularly true for smaller companies, where investors will need to weather some short-term volatility to harness their longer-term growth potential. Nervous investors that sold out at the first sign of trouble would have missed out on the longer-term gains.

The annual Dalbar survey shows why this is important: investors continue to underperform the market because they buy and sell at the wrong time. Investors tend to sell out of investments during downturns and miss out on rebounds. In the most recent study, the group found that the average US equity investor underperformed the market by 5.5% due to poor timing. This is a consistent phenomenon year and after. The report illustrates the importance of a long-term investment strategy.¹⁰

While ISA millionaire status will only be afforded to a lucky few, it is possible to build up your ISA investments by following their habits. A combination of time, contribution levels, the right investments and then not getting distracted by market noise may be the best policy.

¹ Moneyweek - Number of ISA millionaires triples in three years - 22 October 2024
² Hargreaves Lansdown - 3 secrets of HL’s ISA millionaires - 6 March 2025
³ Trustnet - How to invest like an ISA millionaire: Ditch funds for investment trusts and stocks - 7 March 2025
⁴ MSCI, MSCI World index, 31 March 2025
⁵ Thisismoney - Monthly Lump Sum Savings Calculator - 26 March 2025
⁶ MSCI, MSCI World, 31 March 2025
⁷ MSCI, MSCI World, 31 March 2025 
⁸ Moneyweek - The best-performing stocks and shares ISAs over 25 years - 22^nd August 2024
⁹ The AIC - ISA Millionaires - 13 February 2024
¹⁰ PR Newswire – Dalbar investor behaviour report finds – 31 Mar 2025
* The Company’s benchmark is the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index