How quickly could I become a Stocks and Shares ISA millionaire?

There are around 2,000 Stocks and Shares ISA millionaires in the UK. The most successful has accumulated more than £6m.

That’s good going for a scheme limited to a maximum of £20,000 per year. And it was a lot less than that in the early years.

So how quickly might an investor like me starting today build up an ISA million? It’s all down to how much we save each year, and what returns we might get.

ISA decade

Over the past decade, Stocks and Shares ISAs have returned 9.6% a year on average. That’s been very variable, mind.

In the 2019-2020 Covid crash year, they lost an average of 13%. The next year, they gained 13%.

As an aside, I think that shows how quickly stock market panics can ease — and how smart, long-term investors can profit from them.

How many years?

That 9.6% might not be sustainable. But shares have been outperforming other forms of investment for more than a century now.

So here’s a table showing different sample annual returns. It also shows how many years it would take to build a million if we can stash away the full £20,000, spread out over the year:

Annual return
Annual investment
Number of years

4%
£20,000
28

6%
£20,000
24

8%
£20,000
21

10%
£20,000
19

Future returns

What future gains are likely? Studies by Barclays found that the UK stock market has returned around 5% per year above inflation, over the long term.

Inflation is mad right now, but it should hopefully settle to around 2% in the long run. So somewhere between those 6% and 8% figures seems realistic to me.

Those timescales really are well within reach of a lot of investors today. In fact, even those in their 50s might make it before reaching retirement age.

Buffett years

While I’m here, I thought I’d add an extra table, with just one entry. It’s a special one just for billionaire investor Warren Buffett. Here it is:

Annual return
Annual investment
Buffett years

19.8%
£20,000
13

Since taking control of Berkshire Hathaway in 1965, Buffett has posted average returns of 19.8% per year.

Anyone matching that could bag a million in just 13 years. Now yes, I know, none of us is likely to equal him. But it’s inspiring to see, don’t you think?

Easy money?

Now I don’t want anyone to think it’s a sure-fire thing. They say past performance isn’t an indicator of future performance, and that’s dead right.

In particular, I think dividends could be erratic in future years. And many ISA millionaires have relied on dividends for their success.

Still, there are plenty of UK shares on dividends of 7%, 8%, and more. And the latest research from investment firm AJ Bell suggests 2023 could be the third best year ever for cash returns from FTSE 100 stocks.

Whatever we might achieve, I reckon a Stocks and Shares ISA is the best way to go for a long-term investor like me.

The post How quickly could I become a Stocks and Shares ISA millionaire? appeared first on The Motley Fool UK.

Don’t miss this top growth pick for the ‘cost of living crisis’

While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:

Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion

Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.

Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.

Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.

Claim your FREE copy now

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More reading

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RC365 Holding shares are on fire! Should I buy?
Down 15% from March, this FTSE 100 high-yield star looks cheap to me
Here’s how I’d aim for £5,000 a year in passive income from FTSE 100 shares
Head versus heart. Should I buy BAE Systems shares today?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc and Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

There are around 2,000 Stocks and Shares ISA millionaires in the UK. The most successful has accumulated more than £6m.

That’s good going for a scheme limited to a maximum of £20,000 per year. And it was a lot less than that in the early years.

So how quickly might an investor like me starting today build up an ISA million? It’s all down to how much we save each year, and what returns we might get.

ISA decade

Over the past decade, Stocks and Shares ISAs have returned 9.6% a year on average. That’s been very variable, mind.

In the 2019-2020 Covid crash year, they lost an average of 13%. The next year, they gained 13%.

As an aside, I think that shows how quickly stock market panics can ease — and how smart, long-term investors can profit from them.

How many years?

That 9.6% might not be sustainable. But shares have been outperforming other forms of investment for more than a century now.

So here’s a table showing different sample annual returns. It also shows how many years it would take to build a million if we can stash away the full £20,000, spread out over the year:

Annual return
Annual investment
Number of years

4%
£20,000
28

6%
£20,000
24

8%
£20,000
21

10%
£20,000
19

Future returns

What future gains are likely? Studies by Barclays found that the UK stock market has returned around 5% per year above inflation, over the long term.

Inflation is mad right now, but it should hopefully settle to around 2% in the long run. So somewhere between those 6% and 8% figures seems realistic to me.

Those timescales really are well within reach of a lot of investors today. In fact, even those in their 50s might make it before reaching retirement age.

Buffett years

While I’m here, I thought I’d add an extra table, with just one entry. It’s a special one just for billionaire investor Warren Buffett. Here it is:

Annual return
Annual investment
Buffett years

19.8%
£20,000
13

Since taking control of Berkshire Hathaway in 1965, Buffett has posted average returns of 19.8% per year.

Anyone matching that could bag a million in just 13 years. Now yes, I know, none of us is likely to equal him. But it’s inspiring to see, don’t you think?

Easy money?

Now I don’t want anyone to think it’s a sure-fire thing. They say past performance isn’t an indicator of future performance, and that’s dead right.

In particular, I think dividends could be erratic in future years. And many ISA millionaires have relied on dividends for their success.

Still, there are plenty of UK shares on dividends of 7%, 8%, and more. And the latest research from investment firm AJ Bell suggests 2023 could be the third best year ever for cash returns from FTSE 100 stocks.

Whatever we might achieve, I reckon a Stocks and Shares ISA is the best way to go for a long-term investor like me.

The post How quickly could I become a Stocks and Shares ISA millionaire? appeared first on The Motley Fool UK.

Don’t miss this top growth pick for the ‘cost of living crisis’

While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:

Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion

Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.

Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.

Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.

Claim your FREE copy now

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setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()

More reading

A stock market rally is coming and I expect my 45p Lloyds shares to fly
RC365 Holding shares are on fire! Should I buy?
Down 15% from March, this FTSE 100 high-yield star looks cheap to me
Here’s how I’d aim for £5,000 a year in passive income from FTSE 100 shares
Head versus heart. Should I buy BAE Systems shares today?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc and Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

 

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