What are the best UK shares? Maybe we should ask the ‘ISA millionaires’?
I’d never heard this phrase – ISA millionaire – until recently. But now there are thousands of them.
To be accurate, a Freedom of Information request showed 4,000 UK citizens have now swollen their ISAs past the £1m mark, with an average holding of £1.4m.
ISAs have only been around for a few years and have strict deposit limits, so these millionaires must have grown their wealth rather than chucking in any existing riches.
New report
I’d love to take a sneak peek at these million-pound portfolios to steal the secrets to getting rich. And, well, now I can.
A new report from AJ Bell revealed the 10 most popular UK shares of ISA millionaires. Great stuff. Let’s take a look.
% of ISA millionaire holders
Shell
39%
Lloyds
32%
GSK
32%
BP
31%
Aviva
28%
National Grid
25%
Haleon
25%
Scottish Mortgage Investment Fund
24%
Legal & General
24%
HSBC
23%
One thing jumps off the screen here – lots of dividend shares. No surprises here. Our ISA millionaires can hardly be blamed for using their riches to withdraw a passive income.
Take Legal & General. Its 8.26% dividend yield from £1.4m delivers a (tax-free!) passive income of £112,840 straight to the owner’s ISA.
These millionaires would hope for those £100k plus in dividends to rise as years go by too. Cripes.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Well, good on them for getting there, but I’m a little short of a cool million so I’ll discard the mammoth dividend businesses and focus on the promising growth stocks.
In this case, I’m going to throw out anything with a 5% yield. Now we’re left with GSK, Haleon, and Scottish Mortgage Investment Trust.
GSK and Haleon (spun off from GSK) are a surprise to me. These pharma firms haven’t been great buys and I’m not interested in buying the shares today.
But the inclusion of Scottish Mortgage (LSE: SMT)? That makes sense after a meteoric rise where shareholders could have bagged a 3,209% return.
AJ Bell’s ISA millionaires might have a few kind words to say about the fund propelling their accounts past the seven-figure mark.
A buy?
One reason for Scottish Mortgage’s success has been a focus on fledgling growth companies, usually in the tech sphere. The fund picked Tesla and Nvidia, to name a couple.
The past is the past, however, so I’m more interested in whether this fund might mint the next batch of ISA millionaires.
Well, technology has had a terrific run and there are no guarantees that will continue.
Further, firms like Nvidia (6.5% of portfolio) and Tesla (3.4% of portfolio) are larger now and don’t look cheap.
But the portfolio is broad with ample exposure to unlisted companies.
SpaceX (4.3% of portfolio) launched more orbitals last year than any other entity – even the US or Chinese governments – and has bags of potential.
Cheap fees
Other holdings include the ‘Latin American Amazon’ of Mercadolibre and Tiktok-owner Bytedance. These foreign companies aren’t simple to research otherwise.
Fees are reasonable too. While some funds charge 2% and call it good value, Scottish Mortgage charges a bargain-sounding 0.34%.
Will the shares make me a millionaire? I don’t know, but I don’t plan to die wondering. I’m happy to hold the shares I have.
The post What UK shares do ISA millionaires buy? appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. John Fieldsend has positions in Aviva Plc, Legal & General Group Plc, Lloyds Banking Group Plc, Scottish Mortgage Investment Trust Plc, and Tesla. The Motley Fool UK has recommended GSK, HSBC Holdings, Haleon Plc, Lloyds Banking Group Plc, MercadoLibre, Nvidia, and Tesla. 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.
