The UK’s ISA ‘Super Investors’ who have built up sizeable portfolios are a lesson in the benefits of diligent saving and clever or opportunistic stock and fund picking.
AJ Bell can now reveal the latest trends for its ISA Super Investors – individuals with Stocks and shares ISA portfolios worth more than £1 million, as well as Junior ISAs that have hit the £100,000 mark and Lifetime ISAs worth £50,000 or more.
What do Stocks and shares ISA millionaires hold?
AJ Bell’s Stocks and shares ISA millionaires’ portfolios are dominated by shares and to a lesser extent investment trusts. Funds and ETFs (exchange-traded funds) are less popular, which makes sense when you consider that ISA millionaires might be experienced investors and feel they’ve got what it takes to pinpoint the best stocks themselves.
Funds and ETFs provide broad exposure and good diversification, which is incredibly helpful to individuals who want to spread their risk. The problem is that when one or two holdings inside a fund or ETF do well, their success is diluted by the multitude of other holdings.
Some people like the comfort that comes with funds. Others only want to back the winning horse, not the whole pack. With a concentrated portfolio, any change to the value of individual stocks is instantly felt, good or bad.
AJ Bell’s Stocks and shares ISA Super Investors are drawn to blue chip names on the UK stock market. Household names like banking group Lloyds and life insurer Legal & General have been around for decades and investors might take the view their size and scale equate to steady profit growth well into the future. A preference to back mature, established businesses over start-ups might also reflect the typical older age of an ISA millionaire.
For example, more of AJ Bell’s ISA millionaires hold shares in Greggs than Tesla, suggesting they prefer jam today (donuts or profits) rather than jam tomorrow.
What’s behind six-figure Junior ISA portfolios?
The £9,000 cap on contributions into a Junior ISA might be less than half the amount permitted into an adult ISA, yet there are plenty of children who may find their 18th birthday brings more joy than the ability to buy their first pint.
There are many teenagers and even pre-teens with more than £100,000 sitting in their Junior ISA. They can get their hands on that money once they turn 18. Some might use the money to help fund university, while others might be able to get on the housing ladder. For many others, it’s a massive helping hand to start their own investment journey that lasts for their lifetime.
The most popular holdings among AJ Bell’s Junior ISA Super Investors are evenly spread between shares, investment trusts, funds and ETFs.
Scottish Mortgage Investment Trust is the most popular holding overall – a vehicle that aims to back tomorrow’s market leaders. Parents or grandparents who contribute to a Junior ISA might take the view that time is on the child’s side and so they can take higher risks, hence the omnipresence of a growth-orientated investment trust.
However, it’s notable that eight out of the top 10 most held shares among AJ Bell Junior ISA Super Investors also appear in the most popular stocks list for AJ Bell’s ISA millionaires. That implies that successful stock pickers are sticking to names that have served them well, and they’re passing down their investment wisdom through repeating their portfolio choices in the child’s Junior ISA. Names on the list include drugs company GSK and oil producer BP.
This point is also illustrated by the presence of certain investment trusts typically associated with older investors, namely blue-chip stalwart City of London, generous dividend payer Greencoat UK Wind, and capital preservation vehicle Personal Assets Trust. They’re not necessarily the names one might expect to see in a Junior ISA, but the people feeding the accounts could take the view that slow and steady wins the race.
What’s in the biggest Lifetime ISAs?
Funds and ETFs are the most popular investment choices for those holding a Lifetime ISA worth more than £50,000.
Lifetime ISAs can be opened by individuals aged 18 to 39, and it is plausible to suggest this account could be their first experience at investing. Many new investors opt for funds and ETFs as they are straightforward ways to get exposure to a broad range of assets.
Multi-asset funds – also known as ‘all-in-one’ funds – are popular among Lifetime ISA Super Investors, with AJ Bell’s own funds and Vanguard’s LifeStrategy products being key choices. Fidelity Index World is also high on the list, giving investors exposure to companies around the world.
While plenty of Lifetime ISA Super Investors cast their net wide with funds, stocks do feature in some people’s portfolios. There is a mixture of classic UK blue-chip names like engineer Rolls-Royce and life insurer Aviva, sitting alongside AI chip giant Nvidia and electric vehicle-to-robot specialist Tesla.
Investment trusts get less of a look-in among Lifetime ISA Super Investors. Where they do feature, technology is the dominant theme. Scottish Mortgage, Polar Capital Technology Trust and Allianz Technology Trust all appear in the top 10 most popular names in the investment trust space, suggesting some investors are happy to go big on tech in the search for better returns than the broader market.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
