As of 2023, there were more than 4,000 ISA millionaires in the UK, almost all of whom held their wealth inside a Stocks and Shares ISA. It’s a coveted financial position to have. After all, apart from providing enormous financial freedom, all this wealth is out of reach to the grubby hands of HMRC.
Naturally, investors may be keen to find out which stocks these wealthy individuals are holding. After all, if they’ve achieved such success, copying their investments sounds like a prudent move. But could copying actually be a mistake? Let’s take a closer look at what these millionaires are holding.
Popular stocks among ISA winners
It may be easy to assume they all invested early in high-flying growth enterprises, possibly in the technology or biotechnology sector. Yet, according to AJ Bell, it’s quite the opposite. In fact, the top five most popular stocks among seven-figure ISAs on its trading platform are Shell (LSE:SHEL), Lloyds, GSK, BP, and Aviva.
All three of these businesses are mature industry titans and have a large presence within the FTSE 100. None of them scream out high growth since they’ve primarily got a reputation for being a source of steady passive income. Does that mean dividends are the key to becoming a millionaire?
It’s certainly one route to take. However, there’s a critical piece of information that perfectly explains why these stocks are so popular. The average age of ISA millionaires, according to AJ Bell, is 72. In other words, most of these ISA portfolios are geared towards generating a retirement income rather than achieving growth.
So while the idea of copying an ISA millionaire’s portfolio may sound sensible on paper, it’s important to note the investment objectives don’t line up. Therefore, such a decision is likely unsuitable. But what if someone is looking to transition their portfolio into generating a retirement income for themselves?
Are these investments worth owning?
Following in the footsteps of other successful investors can be a lucrative strategy when the investment objective and risk tolerances line up. So does that make the previously mentioned shares perfect additions to a low-risk retirement portfolio?
Let’s take a closer look at Shell. As one of the largest oil & gas energy businesses in the world, it has had little trouble finding demand for its products. And while 2022 was an exceptional year for both oil and gas prices, the firm continued to show resilience in 2023, hiking dividends and maintaining its share buyback policy.
This marked the third year in a row dividends were hiked since they were slashed following the 2020 pandemic. And it’s obviously good news for income investors like the ISA millionaires holding onto the stock.
But its earnings figures also highlight the group’s exposure to fluctuating commodity prices making it quite cyclical. Buying near the top of the cycle could be a mistake, even if dividends are maintained since a falling stock price could offset any gains.
All of this is to say that even the most popular retirement income stocks that are considered to be ‘safe’ carry risk. And it’s up to investors to judge whether these threats are worth taking on board.
Personally, I think there are far better income opportunities available on the London Stock Exchange that don’t appear inside any ISA millionaire’s portfolio list.
The post Here’s what Stocks and Shares ISA millionaires are buying in 2024 appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
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See the full investment case
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended GSK and Lloyds Banking Group Plc. 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.
