Who wants to be an ISA millionaire?

Ian Cowie dives into the investment trusts that would have made you over £1,000,000.

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Who wants to be a millionaire? I do! Now, if you do too, here’s the really good news. No fewer than 32 investment companies would have made millionaires out of anyone who invested their full individual savings account (ISA) allowance every year since this tax shelter was created in 1999.

True, you would need £1.82 today to match the purchasing power of £1 a quarter century ago because of the effect of inflation, according to the Bank of England. Taking account of the varying annual allowances during that period, a maximum total of £306,560 could have been invested in Isas over those 25 years.

Now bear in mind these investment company shares would have been bought and placed in ISAs each year since 1999, rather than all of the money being available at the start. So the fact that two of those 32 ‘millionaire investment companies’ ended the period worth more than £2 million is all the more remarkable.

It demonstrates the value of starting to invest sooner, rather than later, and letting time to do the heavy lifting for you. Once you have popped your investment companies’ shares in an ISA, compounding returns can make capital gains grow on gains and income arise from income, all of it tax-free.

Looking at this list of long-term winners, compiled by the AIC and based on data from independent statisticians Morningstar, it is striking how diverse it is. For example, only two of the ‘millionaire investment companies’ are from the AIC’s ‘North America’ sector - they are JPMorgan American (stock market ticker: JAM), which came seventh with an end value of £1,413,500, and Canadian General Investments (CGI), which came 15th with £1,159,765.

Only another two are from the AIC’s ‘Technology and Technology Innovation’ sector - they are Allianz Technology Trust (ATT), which came second with £2,095,955, and Polar Capital Technology (PCT), which came third with £1,912,656.

That fact might surprise followers of fashion after all the recent media coverage, concentrating on America’s so-called ‘Magnificent Seven’ technology shares - namely Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).

"The composition of the ‘millionaire investment companies’ list makes the case powerfully for building a diverse global portfolio, with exposure to different kinds of companies, countries and currencies. That way, we can build exposure to wealth wherever it is created."

Ian Cowie

ian cowie

More positively, the composition of the ‘millionaire investment companies’ list makes the case powerfully for building a diverse global portfolio, with exposure to different kinds of companies, countries and currencies. That way, we can build exposure to wealth wherever it is created.

For example, three of the winners are from the AIC’s ‘Biotechnology & Healthcare’ sector - they are Worldwide Healthcare Trust (WWH), which came 11th with £1,197,232; International Biotechnology Trust (IBT), which came 12th with £1,194,730; and Biotech Growth Trust (BIOG), which came 14th with £1,169,361.

It is a remarkable fact that no fewer than 12 of the 32 ‘millionaire investment companies’ contain the phrase ‘smaller companies’ in their titles. This demonstrates the fact that small companies can deliver big returns, even if - as is often the case - the underlying businesses have yet to become household names.

That also illustrates how professional fund management can give ordinary investors exposure to commercial sectors and countries where we are unfamiliar with any of the most valuable opportunities for capital growth and rising income.

Coming down from the clouds of macroeconomics, I would not be human if I did not confess to taking some pride in owning shares in six of these 32 millionaire investment companies. Lest that sound smug and give the wrong impression, I had better add straightaway that I have only owned one of them (JPMorgan Indian: JII) for more than the quarter century under review and, for purely personal finance reasons - or, in plain English, lack of cash at the time - failed to invest anything like the full Isa allowance in it every year.

But I really mustn’t grumble because all six of these investment companies - and another dozen in my self invested personal pension (SIPP) - helped push my ‘forever fund’ into seven-figure valuations more than a decade ago.

Here and now, looking forward, most of the ‘millionaire investment companies’ in the AIC/Morningstar list are still trading at double-digit discounts to their net asset values (NAVs) today. So I am not telling you about them when it is too late do anything about it.

Quite the opposite: there is good reason to consider taking action without delay because this year’s ISA allowance, enabling every adult to place £20,000 beyond the grasp of the taxman, expires at midnight on April 5. As the name suggests, the allowance is annual, so it must be used each tax year or lost forever. You cannot catch up later, it really is a case of use it or lose it.

Ian Cowie is a shareholder in Apple (AAPL), Canadian General Investments (CGI), Fidelity European (FEV), International Biotechnology Trust (IBT), JPMorgan Indian (JII), Microsoft (MSFT), Polar Capital Technology (PCT) and Worldwide Healthcare (WWH) as part of a diversified global portfolio of investment trusts and other shares.