It’s all very well people like me telling you how we’d try to become Stocks and Shares ISA millionaires. But what do the millionaires themselves say?
Here are five habits of the most successful investors, which a lot of us can learn from.
1: Investment trusts
Looking round ISA holdings at several providers, it seems the millionaires make greater use of investment trusts than most.
The average millionaire has about 40% of their cash in them, with the average among all accounts down at around 25%.
Investment trusts can provide wider diversification from a targeted strategy. And some have the best long-term dividend growth records of any UK stocks.
2: Cash and funds
According to Interactive Investor, its ISA millionaires have a lot less money in cash and managed funds.
They hold less than 5% in cash, against 8% overall. And they have 11% in funds, compared to 24%.
That makes a lot of sense to me. I’d buy shares in fund managers, for sure. But I’d never hand over any cash for them to manage for me.
And as for the poor long-term returns from Cash ISAs? Well, they’re guaranteed and they’re safer. But they’re not for me.
3: Buying Lloyds shares
Looking at January figures from Hargreaves Lansdown, Lloyds Banking Group (LSE: LLOY) was the most popular stock that month. And Lloyds always seems to come in the top few, every time.
That’s across all Stocks and Shares ISAs. But the non-millionaire investors also tend to be in and out of growth stocks, like Nvidia and Tesla, far more than the top few.
Lloyds has two characteristics I think makes it stand out, in line with my last two secrets. And I guess by now you’ve spotted that they’re not all that secret, really.
4: Dividends, not growth
The million-pound folk go more for dividend stocks than growth. And it seems that’s mainly because they want to put their cash into something that should stand the test of time, and which they can buy and forget.
Right now, we’re looking at a 5.7% dividend yield from Lloyds. It’s not the FTSE 100‘s biggest. But it looks like there should be plenty of cash to pay it. And forecasts show it growing nicely.
National Grid, Legal & General, Shell… dividend stocks like those often help fill the lists. And that’s for most investors, which is nice.
5: Long term
Lloyds is also a good example of millionaire investors’ approach to risk. Yes, Lloyds and the rest of the banking sector face danger now.
High interest rates, bad loans, recession… they could all add to the pressure in the next few years.
But the way to deal with that is to buy shares for the long term. It seems the millionaires don’t care too much about short-term share prices, and more about the cash streams they can hoover up over the decades.
As it happens, Lloyds is one of the most popular stocks with The Motley Fool readers too. I hope we can do our bit to help more of them become ISA millionaires.
The post 5 secrets of Stocks and Shares ISA millionaires appeared first on The Motley Fool UK.
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Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Hargreaves Lansdown Plc, Lloyds Banking Group Plc, 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.
