THE INVESTING

SECRETS OF ISA
MILLIONAIRES
For a long time, ISAs have been viewed as
the first port of call for investors looking
to save for the future. It’s easy to see why
– ISAs offer a range of fantastic benefits
including their tax-efficiency, flexibility
and simplicity.
In this fact sheet, we explain how ISAs allow
you to shelter considerable sums from
the taxman by profiling three Hargreaves
Lansdown clients who have built up ISAs
worth over £1 million by investing in the
stock market.
ISAS - THE BASICS
An ISA, or Individual Savings Account, is
not an investment in its own right. The
best way to think of an ISA is as a
‘wrapper’ in which investors can shelter
savings and investments from tax. Within
an ISA investors pay no capital gains
tax and no UK income tax on income
or interest. They don’t even need to be
declared on a tax return, and less tax
means higher returns.
Any UK resident aged 18 or over (16 for
Cash ISAs) can invest. There is no upper
age limit and investors can withdraw
their savings whenever they need to.
Best of all, it often costs no more to
place cash or investments inside an ISA,
so many investors receive these benefits
free. Used regularly, the annual ISA
allowance offers the chance to create a
substantial portfolio sheltered from the
taxman, although remember tax rules can
change, and the benefits will depend on
individual circumstances.
TWO MAIN TYPES OF ISAS
Cash ISAs – Cash ISAs operate just like
a normal savings account except the
interest is tax-free. Interest rates will vary,
so shop around for the best deal using the
best-buy tables which can be found in the
press or online. Do watch out for headline
grabbing introductory rates or temporary
bonuses though, as when these disappear
savers can be left with an unattractive rate.
Stocks and Shares ISAs – Those prepared
to accept more risk for potentially higher
returns might consider a Stocks and
Shares ISA. Within a Stocks and Shares
ISA investors can choose from a range
of investments including funds, shares,
investment trusts, ETFs, corporate bonds
and gilts, so investors can take as much or
as little risk as they are comfortable with.
Remember unlike cash all investments can
fall in value as well as rise so investors could
get back less than they invest.
£20,000 ALLOWANCE
When ISAs (formerly PEPs) were first
introduced in 1987, each individual could
only contribute a maximum of £2,400
each tax year. Today, investors can shelter
up to £20,000 from the taxman (2018/19
tax year) meaning a couple can protect
£40,000 of their savings and investments
from tax.
The generous ISA allowance from the
government means individuals and
couples can build significant tax-efficient
sums by tucking money away in an ISA
each year.
The ISA allowance can be split as you wish
between a Cash ISA and Stocks & Shares
ISA, as long as you stay within the overall
£20,000 annual allowance.

Important Notes: If you choose to invest within an ISA, just remember that investments can go down as well as up in value, so you could
get back less than you put in. The information in this guide was correct as at 6 April 2018. ISA tax rules can change, and their benefits
depend on your circumstances. We wrote this guide to give you useful information about ISAs, but it’s not personal advice. If
you’re thinking about investing and you’re not sure if a particular investment is right for you, please ask for advice. All investments should
be held for the long term as their value and income can fall as well as rise, therefore investors could get back less than they invest.
The HL Multi-Manager funds are managed by our sister company Hargreaves Lansdown Fund Managers Ltd. This guide is issued by
Hargreaves Lansdown Asset Management Ltd, who are authorised and regulated by the Financial Conduct Authority. April 2018
INTRODUCING THE ISA MILLIONAIRES
SUMMARY OF THE ISA MILLIONAIRES
When did you start your ISA?
Why ISAs?
Income/Growth strategy
Fund or shares?
Income/Growth strategy
It is estimated there are around 200
investors in the UK who have built ISAs
worth over £1 million by investing in a
Stocks & Shares ISA. These investments
are sheltered from tax meaning there is no
further income tax to pay or capital gains
tax to pay on the investments.
In this fact sheet, we profile three
Hargreaves Lansdown clients who have
built up ISAs worth over £1 million by
investing in a Stocks & Shares ISA. They
share their stories explaining their reasons
for investing in ISAs as well as their
investment strategies. They also provide
a selection of tips for ISA investors to help
them on their investment journey.
The ISA millionaires all asked to remain
anonymous for this fact sheet so we have
referred to them as ‘Mr C’, ‘Mr L and ‘Mr
MR F
FROM NORTH MR L
YORKSHIRE FROM SUFFOLK
1987 (when PEPs were introduced) 1987 (when PEPs were introduced)
• Tax benefits (great way to • Tax-efficiency (tax-free
generate tax-free income
income for retirement)
for retirement)
Income/Growth strategy Income
Shares (including ETFs and REITs) Shares
‘Be calm and invest for the
‘Try not to chase the story’
long-term’
M’. While all their stories differ, there are
recurring themes to their ISA success
which crop up again and again. These
include the importance of:
• Contributing the maximum amount to
your ISA each year
• Investing as early as possible in the
tax year
• Not procrastinating - open and invest
an ISA as early as possible
• Picking investments for the long-term
(over five years)
• Remaining patient in tough markets
• Researching your investments
• Not overtrading
We hope you enjoy the investing stories
of our ISA millionaires and they provide
an insight into what it takes to become a
successful investor.
MR M
FROM ESSEX
A few years after PEPS
were introduced
• Tax benefits (No capital gains or
further UK income tax)
Growth
Mixture
‘Investing is for the long-term’
MR C FROM
NORTH YORKSHIRE
MR C’s ISA TIPS:
• Contribute as early as possible
in the tax year to allow your
investments to grow
• Conduct a quarterly valuation
of your ISA to make sure it’s
on track
• When investing for the long-
term, don’t worry about the
short term noise.
Q: Why do you invest through ISAs?
A: I invested in ISAs from the moment
they originally launched (as PEPs). I was
already an investor in the stock market
before then having learned about
investing at my grandfather’s knee and
when ISAs came along, they were ideal.
ISAs were initially designed to encourage
more people to invest in the stock market
but for people like me, it just meant I could
pay less tax on my investments. I first
opened an ISA for myself, my wife and my
mother, and when my children were old
enough, I opened ISAs for them too. In
recent years, I’ve also opened Junior ISAs
for my grandchildren so they can save tax
on their investments in the future.
The main benefit for me is that ISA
investments are sheltered from UK
income tax and capital gains tax. This was
particularly important when I first opened
an ISA as tax rates were higher then than
now, though the tax benefits of ISAs still
apply today.
I put in the maximum amount each year
and as soon as possible after the tax year
begins. There’s a lot of rushing around at
the end of the tax year before the deadline
closes but I try to do it at the beginning of
each tax year. The earlier you can invest,
the longer you have for your investments
to grow and benefit.
Q: What investments do you hold in
your ISA?
A: I hold 100% of my ISA portfolio in
equities (shares). I have subscribed to a
particular weekly magazine for decades
and get most of my share ideas from
there. I don’t always agree with their
recommendations but they put down the
facts (such as several years of dividends
and earnings per share) that I need for
making my investment decisions.
For some more obscure investments, I will
sometimes choose funds. For instance, I
wanted exposure to Turkey and Vietnam
at one time so I bought funds specialising
in those countries. I’ve also bought several
real estate investment trusts (REITs)
which seem particularly suitable for ISAs
because of their high yields.
The rules allowing AIM shares to be held
in an ISA are very helpful. It used to be
bad news when a company switched from
the main market to AIM as you weren’t
allowed to hold AIM shares in an ISA; you
were forced to sell them. I missed out on
some big gains as a result, so I could have
done even better with my ISA had the
rules been as they are now.
Q: What are the keys to
successful investing?
A: I believe the stock market is
sometimes quite slow to react to good
news. Sometimes, I’ll look at a company
announcing good results and nothing will
happen to the share price. It will then take
a week or so for the market to react and
the stock to rise. This can present some
useful opportunities.
Other than this, I do a quarterly valuation
of my ISA to measure performance
of each investment, both in absolute
terms and relative to the market as a
whole. I think it is a good discipline for
investors. Also, every now and then, I do
have a spring clean of my investments
to clear away the low-value clutter. At
the moment, I have 32 shares in my ISA
and there are several small investments I
should probably get rid of.
This is not to say my investing life has
been a total success – I’ve had some
complete disasters along the way but
this is part of long-term investing. I do
think it’s important not to become faithful
to particular shares and you should sell
them if they are not doing what you
expected them to do. Too often, I have
ignored warning signs and ended up with a
worthless holding.
Q: Do you have any tips for
ISA investors?
A: Be calm. If you are investing in shares,
you should do it for the long-term and not
worry too much about the short-term
noise. The greatest lesson I ever learned
was when, as a young boy, I was reading
the Financial Times with my grandfather
and used to get excited that a stock had
gone up. However, he used to say ‘that’s
only one day and it’s how they do over
the long-term that matters’. That was
good advice.
I am not a trader and generally try to select
investments that I want to hold for five
years or more. If share prices do fall, I look
to add to my holdings instead of running
towards the exit.
I can’t promise that this strategy will work
for other people but it has served me well.
Q: What is your experience of using
Hargreaves Lansdown’s ISA?
A: My own stockbroker didn’t actually
do ISAs at the time they were launched
so I opened an account with my bank.
However, the bank started putting its
prices up so I looked around for another
provider. Hargreaves Lansdown is just so
much simpler and infinitely cheaper than
my previous ‘full-service’ stockbroker and
now I manage all my family’s ISA and
non-ISA investments through the
Vantage service.
MR L FROM
SUFFOLK
MR L’s ISA TIPS:
• Over time, the tax savings of
ISAs make a big difference
• Don’t overtrade the
investments in your ISA - it can
affect your returns
• Try not to chase the latest
investment story. Instead, look
at a company’s fundamentals.
Q: Why do you invest through ISAs?
A: ISAs were originally called PEPs
(Personal Equity Plans) when I initially
chose to invest and at the time, it seemed
like a good idea. Back when Nigel Lawson
introduced PEPs, you could invest a
maximum £6,000 in a general PEP plus an
additional £3,000 in a single company
PEP – I started contributing the full
amount immediately.
The main reason I started investing in
ISAs was due to their tax-efficiency. Early
on, the tax savings don’t make much
difference but once you get going and
build a bigger ISA portfolio, it makes a
considerable difference. Now I’m retired, it
has a big impact on the amount of income
I receive from my ISA.
Q: What is your investment strategy?
A: My investment strategy has changed
over the thirty or so years that I’ve been
investing in ISAs. I began investing around
the time Jim Slater brought out his book,
the Zulu Principle, and I decided to follow a
growth investment strategy.
Now that I’m nearing retirement, the way
I choose to invest my ISA has changed. I
mainly invest in income-bearing shares
on the basis that if the stock falls, I can at
least take the income. I haven’t started
taking an income from my ISA yet but I
expect to do so in the next couple of years
and it will account for around 50% of my
total income.
Q: What are the keys to
investing success?
A: In my experience, picking good value
shares and not overtrading – I strongly
believe actively trading is bad for your
portfolio. Depending on the size of
the share you buy, you can lose 0.5%
every time you trade meaning if you
trade that stock twice a year, that’s 1%
gone immediately.
Most of the time, I simply try not to chase
the story and work off the fundamentals.
Q: Are there any investments
you like currently?
A: It’s actually more about what I don’t like
at the moment – and that is oil and
mining shares. That’s not to say I don’t
think one should be investing, just that
these are the areas of my ISA which have
performed poorly recently. I will continue
to hold onto my oil and mining shares for
the time being.
Q: When did you become a HL client
and why?
A: The main reason was security. I used
to hold my ISA with another provider who
previously spread the cash in the account
between five different banks. However,
the company then changed the way they
treated cash and decided to put all their
client’s cash into a single bank. As there
was a possibility that I might have more
than £80,000 cash in my ISA at any one
time, I decided to transfer to Hargreaves
Lansdown and I have enjoyed the service
since then.
MR M FROM
ESSEX
MR M’s ISA TIPS:
• If you have money you won’t
touch for at least five years it
makes sense to have it in an ISA
• Don’t worry about timing the
market
• Invest for the long term
Q: Why did you initially invest
through ISAs?
A: I first invested in ISAs a couple of
years after they launched when I realised
they were for the long term and any
future capital gains and income would
be tax-free.
I use my full ISA allowance each year and
put the cash in at the start of every tax
year. I don’t necessarily invest the money
straight away but I make sure it’s in my ISA
ready for an investment opportunity.
Q: How would you describe your
investment strategy?
A: I read lots of investment articles and
broker ratings on an ongoing basis. I
use this research to note down shares or
funds which look attractive. I’ll continue to
watch these and if they suffer a setback I’ll
look to take advantage and invest.
One area I currently like is emerging
markets as I feel over the long term these
economies will grow more quickly than the
developed world. I try to buy in this
(higher risk) area when it has fallen out of
favour, as it did in the aftermath of Donald
Trump’s election in November 2016.
When I invest in areas like emerging
markets and Japan, I tend to invest via
collective pooled investments, such
as funds and investment trusts. This is
because while I like these areas, I don’t
know them well enough to pick individual
companies to invest in, so I’m happy to
leave it to a professional.
Similarly, I like the biotech and technology
sectors as I believe stocks in these sectors
have huge potential. However, I don’t know
the companies well enough so I’d rather
leave it to a professional to find the next
Apple or Amazon.
If I feel I know a company well enough I’ll
buy individual shares. I tend to buy shares
in large companies in the UK, Europe or
the US. At the moment one long-term
view I have is that people in emerging
markets will increasingly aspire to Western
lifestyles, so I hold large consumer staple
companies that have strong international
presences and can sell their products all
over the world.
Q: What have you used your ISA to
save for?
A: I’ve used my ISA for long-term savings
and to build a nest egg to help fund my
retirement. I’m now retired and I plan
on spending my wealth outside my ISA
before I touch my ISA.
I don’t think there is any point in having
savings outside of an ISA unless you can
save more than the ISA allowance.
If you’ve got money that you won’t touch
for five years then it makes sense to have
it in an ISA. Not only because it is more
tax-efficient but I’ve found that in my ISA
I tend to make longer-term investment
decisions which have performed better
than savings outside of my ISA.
Q: What top tip would you give
ISA investors?
A: Don’t overly worry about timing the
market and try not to trade too frequently.
Investing is for the long term. You should
buy something that if you had to put
it away in a box for 10 years and forget
about it you would be happy to hold it
for those 10 years. Don’t buy something
simply because you think it is cheap and
you’ll be able to sell it for 20% profit in 3
months’ time.
 REASONS TO
OPEN AN ISA
WITH HL…
1. Easy to set up. Start an ISA online in minutes. Please note, the Vantage Service is designed for
clients who like to make their own investment decisions.
2. UK’s number 1 ‘investment supermarket’. With more than 35 years experience helping investors,
we are trusted with over £86 billion by over 1 million clients.
3. Competitive charges. Just 0.45% p.a. (capped at £45 per year for shares) to hold investments and
no charges to buy and sell funds. Click here to view our ISA charges
4. Fantastic customer service. 96%* of our clients rate our service as ‘good’, ‘very good’ or ‘excellent’.
5. Wide investment choice. Choose from over 2,500 funds as well as shares, investment trusts
and more.

* Hargreaves Lansdown Client Satisfaction Survey, November 2016, 712 respondents

DISCOVER MORE ABOUT THE

HL STOCKS AND SHARES ISA