HomeBusinessWhich trusts and funds can make you an Isa millionaire?

Which trusts and funds can make you an Isa millionaire?

Younger investors are more confident about becoming a millionaire ahead of retirement by investing in a stocks and shares Isa, new research suggests.

While cryptocurrency and meme stocks took many of the headlines in the pandemic, the tax-free accounts have proved a popular long-term choice for those starting out in investment.

In a poll of 1,000 Isa holders conducted by Freetrade and InvestingReviews, 14 per cent of adults under 25 expect to build a tax-free pot of £1million by retirement, compared with just four per cent across all age brackets.

Meanwhile, the funds and trusts that have helped people become Isa millionaires since launch in 1999 have been revealed by the Association of Investment Companies (see the full list below).

Investors of the future: More young savers are confident their Isa pot will reach £1m by the time they retire 

Just under half of those aged under 25 invest in their Isa as a priority, more than 32 per cent focusing on cryptocurrency.

The research also reveals three in five Isa holders say they are investing towards financial freedom or retirement, and just over a third are focused on building an emergency fund.

Investment goals differ significantly between men and women: female respondents are twice as likely to spend their savings on their childrens’ education, wedding or to help them onto the housing ladder. 

They are also twice as likely as male respondents to be saving towards buying their own home.

‘Even if a £1million Isa isn’t in your future, the basic habits of monthly investing in a diversified portfolio informed by your financial goals still matters more than the amount in there,’ said Freetrade senior analyst Dan Lane. 

‘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.’

Where to invest to become an ‘Isa millionaire’

While a portion of younger investors may be confident about building their Isa pots, Freetrade’s research reveals the vast majority think the £1million milestone is still out of reach.

On average, investors anticipate building a pot of £218,000 by retirement while 41 per cent do not think they’ll pass the £100,000.

However there are some funds and trusts that have performed well and would have turned investors into Isa millionaires, based on investing a full allowance between 1999 and 2021.

A total of 30 investment trusts had the potential to make savers millionaires if they had invested their full Isa allowance, according to data from the AIC.

Investing the full Isa allowance annually between 1999 and 2021, a total of £266,560, with dividends reinvested, would have generated a pot of over a million.

There is a strong tilt towards technology and unquoted companies in the portfolios of the best-performing trusts.

Fund Sector Current ISA value
Baillie Gifford American North America £1,423,136
Liontrust UK Smaller Companies UK Smaller Companies £1,268,961
Baillie Gifford Pacific Asia Pacific Excluding Japan £1,260,408
Janus Henderson Global Tech Leaders Tech and Tech Innovations £1,248,798
abrdn Indian Equity India/Indian Subcontinent £1,153,411
ASI UK Smaller Companies UK Smaller Companies £1,130,795
Janus Henderson European Smaller Companies European Smaller Companies £1,089,796
AXA Framlington American Growth North America £1,085,387
Threadneedle American Smaller Companies North American Smaller Companies £1,074,175
Threadneedle European Smaller Companies European Smaller Companies £1,073,352
Schroder UK Dynamic Smaller Companies UK Smaller Companies £1,067,174
BlackRock UK Smaller Companies UK Smaller Companies £1,064,004
Threadneedle American North America £1,015,227
Barings Europe Select European Smaller Companies £1,004,378
Source: AJ Bell/ Morningstar, total return to February 2022

Hg Capital, which invests primarily in software and services businesses, would have provided the best return and resulted in a pot of £2,062,931.

Scottish Mortgage, which has Tesla and Tencent in its top holdings, returned £2,046,762.

‘Our core task is to find those companies that have the opportunity to deliver outsized returns and own them for long enough without interferences, so that the return accrues to our shareholders,’ says Claire Shaw, investment specialist at Scottish Mortgage.

‘We believe our first duty to shareholders is to provide value for money and it is pleasing that the continued growth in Scottish Mortgage’s assets has meant that costs as a proportion of net asset value have reduced as the trust shares the benefits of scale with its owners.’

Allianz Technology and Polar Capital Technology returned £1,746,012 and £1,555,681 respectively.

Walter Price, portfolio manager of Allianz Technology says the tech sector is ‘entering a golden age’ as demand and revenue growth remains strong.

‘We expect that the companies that can deliver consistent earnings growth should see attractive stock performance in the near term, though valuations will face their share of headwinds, particularly now that inflation is rising.’

Funds and trusts that hold smaller companies have also performed well. Aberdeen Standard Asia Focus from the Asia Pacific Smaller Companies sector is the sixth best-performing trust in the AIC’s list having returned £1,399,197.

Liontrust UK Smaller Companies, ASI UK Smaller Companies and Janus Henderson European Smaller Companies all returned over £1million if the maximum Isa allowance was invested annually.

The funds returned £1,268,961, £1,130,795 and £1,089,796 respectively, according to AJ Bell research.

‘Investors should bear in mind that past performance is not a guide to future returns. 

‘We would also caution against using your Isa allowance every year to invest in the same fund, as some diversification would be beneficial from a risk management perspective,’ says Laith Khalaf, investment expert at AJ Bell.

‘Nonetheless, splitting your investment equally across these funds and trusts each year would also have produced an Isa value in excess of £1million, while also providing some diversification. It is still a risk hungry approach though, seeing as every single one of these funds is invested purely in the stock market, and some follow fairly specialist strategies. 

‘However long term Isa investors can afford to take such risks if they won’t need to draw on their money for ten to twenty years, or more.’

Investment company AIC sector  % share price total return, 06/04/1999 to 25/02/2022   Total Isa investment  value at 25/02/2022
HgCapital Trust Private Equity 3,450   £2,062,931
Scottish Mortgage Global 1,776   £2,046,762
Allianz Technology Trust Technology & Media 1,603   £1,746,012
Pacific Horizon Asia Pacific 3,210   £1,726,154
Polar Capital Technology Technology & Media 1,298   £1,555,681
Aberdeen Standard Asia Focus Asia Pacific Smaller Companies 3,606   £1,399,197
BlackRock Throgmorton Trust UK Smaller Companies 1,504   £1,394,984
BlackRock Smaller Companies UK Smaller Companies 1,353   £1,313,361
Montanaro European Smaller Companies European Smaller Companies 1,109   £1,225,549
Scottish Oriental Smaller Companies Asia Pacific Smaller Companies 3,222   £1,201,039
TR Property Property Securities 2,015   £1,197,023
3i Private Equity 930   £1,194,494
Rights & Issues UK Smaller Companies 1,730   £1,187,666
Canadian General Investments North America 1,531   £1,187,340
abrdn UK Smaller Companies Growth UK Smaller Companies 724   £1,165,308
BlackRock World Mining Trust Commodities & Natural Resources 2,154   £1,158,910
Biotech Growth Biotechnology & Healthcare 1,315   £1,124,071
Worldwide Healthcare Biotechnology & Healthcare 1,932   £1,120,001
JPMorgan UK Smaller Companies UK Smaller Companies 1,294   £1,102,772
Invesco Perpetual UK Smaller Companies UK Smaller Companies 1,340   £1,099,079
Oryx International Growth UK Smaller Companies 842   £1,092,604
Mid Wynd International Global 1,155   £1,078,848
JPMorgan China Growth & Income China / Greater China 1,497   £1,074,332
JPMorgan European Discovery European Smaller Companies 1,692   £1,063,440
JPMorgan American North America 666   £1,056,986
International Biotechnology Biotechnology & Healthcare 1,658   £1,039,390
JPMorgan US Smaller Companies North American Smaller Companies 1,207   £1,021,282
Henderson Smaller Companies UK Smaller Companies 475   £1,016,271
Schroder AsiaPacific Asia Pacific 1,349   £1,007,009
The European Smaller Companies Trust European Smaller Companies 841   £1,001,620
Source: AIC/Morningstar.
% share price total return is for a single lump sum invested at the beginning of the period.
Total ISA investment value is the total value of an investment on 25/02/2022 if the maximum ISA limit for each year had been invested annually from 1999 to 2021, with the investment being made on 6 April each year.

Compare the best DIY investing platforms and stocks & shares Isa

Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.

When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming. 

Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. 

When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.

To help you compare investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you. 

We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.

>> This is Money’s full guide to the best investing platforms and Isas 

Admin charge Charges notes Fund dealing Standard share, trust, ETF dealing Regular investing Dividend reinvestment
AJ Bell YouInvest 0.25%  Max £3.50 per month for shares, trusts, ETFs.  £1.50 £9.95 £1.50 1% (Min £1.50, max £9.95)  More details
Bestinvest 0.40%  Account fee cut to 0.2% for ready made investments Free £4.95 n/a n/a More details
Charles Stanley Direct 0.35%  No platform fee on shares if a trade in that month and annual max of £240 Free £11.50 n/a n/a More details
Fidelity 0.35% on funds £45 fee up to £7,500. Max £45 per year for shares,  trusts,  ETFs Free £10 Free funds £1.50 shares, trusts ETFs £1.50 More details
Hargreaves Lansdown 0.45% Capped at £45 for shares, trusts, ETFs Free £11.95 £1.50 1% (£1 min, £10 max) More details
Interactive Investor  £119.88 as £9.99 per month £7.99 per month back in trading credit £7.99 £7.99 Free £0.99 More details
iWeb £100 one-off £5 £5 n/a 2%, max £5 More details
Freetrade Free for standard account £3 month for Isa  Freetrade Plus with more investments is £9.99/month inc. Isa fee No funds  Free  n/a  n/a  More details 
Vanguard  0.15%   
Only Vanguard funds
Free  Free only Vanguard ETFs  Free  n/a  More details 
(Source: ThisisMoney.co.uk March 2022. Admin charges quoted annually, may be monthly or quarterly)


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