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A new tribe of ISA investors emerges

A new tribe of ISA investors

A new tribe of young investors now see stocks & shares ISAs as their ticket to millionaires’ row.

A poll of 1,000 ISA holders conducted by InvestingReviews.co.uk and Freetrade revealed that 14% of 18 to 24-year-olds expect to have a £1million fortune by retirement — compared with 4% across all age brackets.

ISA goals by retirement age
ISA goals by retirement age. Image courtesy of Freetrade.io

Many of these young investors first appeared during the pandemic, with the acceleration of digital technologies making it easier than ever to invest.

Although cryptocurrencies have been popular, the poll’s findings indicate stocks & shares ISAs are also seen as an appealing long-term choice for those beginning their investment journey. 46% of people aged between 18-24 said investing in their ISA was a priority, far more than investing in cryptocurrency (32%).

While ISA millionaire numbers — currently 2,000 across the UK — are expected to grow significantly as investor pots compound, most respondents thought the £1million milestone would remain out of reach for them. On average, investors anticipated building a pot of £218,000 by retirement, while 41% didn’t think they would pass the £100,000 mark. Men were more likely than women to think a £1million pot was in their reach (5% v 2%).

The research also looked at the investment goals of ISA holders, with the majority (59%) saying they were investing towards financial freedom or retirement. Just over a third (37%) said their focus was on building an “emergency fund”. Other reasons included creating generational wealth for their family (19%), saving for a home (13%), and saving for a special holiday (12%).

ISA savings goals
ISA savings goals by gender. Image courtesy of Freetrade.io

Investment goals differed markedly between the sexes. Female respondents were twice as likely to spend their savings on their children’s’ education, wedding or to help them get a foot on the housing ladder (14% v 7%). And they were also twice as likely as male respondents to be saving towards buying their own home (17% v 9%).

Simon Jones, CEO of Investing Reviews, commented: “With all the fanfare surrounding cryptocurrencies, it’s reassuring to see there’s a new tribe of young investors who recognise the tremendous wealth-building powers of the stocks & shares ISA.

“Assuming an average annual return of 7%, it would take an investor maxing out their £20,000-a-year allowance around 22 years to reach millionaires’ row.

“Someone starting their investing journey in their teens or early twenties could potentially amass a million by the time they are in their 40s. The roadmap to financial freedom has never been more clearly signposted.”

Dan Lane, Senior Analyst at Freetrade said: “Hitting the seven-figure mark in your stocks and shares ISA is a great ambition to have. But, a bit like the most successful artists, sportspeople and business tycoons, getting there is all about doing the simple stuff well and consistently.

“Even if a £1m 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. Z-list celebs are enough evidence that focusing too much on the big prize and not enough on the groundwork makes for an unconvincing journey.”

In January, HMRC published its ISA Millionaire statistics for the first time ever following an FOI request from Investing Reviews.

The data revealed that the average ISA millionaire has a pot of £1.4million while the country’s 60 biggest ISA holders average an eye-watering £6.2million.

Lord Lee of Trafford became the UK’s first ISA millionaire back in 2003. In a 2015 interview with the FT he revealed his ISA pot had ballooned to £4.5million.

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