Owning an ISA that is worth £1m is never going to be an easy process. It requires a huge amount of patience, time and effort to end up with a seven-figure portfolio. And while many investors have tried to achieve that goal, relatively few have been able to obtain it.
Clearly, it's likely to become easier to build a £1m ISA over time. For starters, the amount which can be deposited has risen significantly in the last decade. Today, an individual can deposit up to £20k in each financial year into an ISA. This makes it easier to reach seven-figure status, but that level may still prove elusive unless an investor can realise that what matters is 'time in the market'.
For many, an ISA is something that's a source of frustration. Sometimes, individuals set one up when they are close to retirement as a means of investing excess cash in order to enjoy tax benefits. In such a scenario, they are unlikely to have the time to deposit sufficient funds in the portfolio in order to reach seven-figure status. Even if they buy stocks that surge higher in a short space of time, becoming an ISA millionaire is unlikely to take place given the difficulty in picking a number of multi-bagging stocks.
Similarly, other individuals will invest in an ISA from a relatively young age. It may be seen as a preferential option to a plain vanilla pension, since it offers greater flexibility. For example, if an individual needs the cash within an ISA for emergency use, or to pay for a house/car, then it's easily accessible. However, this could be seen as a weakness of ISAs. All too often an individual's nest egg is raided at various points in their lives in order to pay for present-day activities. As such, accumulating £1m becomes more difficult.
Therefore, the trick to generating a significant sum within an ISA is to make generous investments year-in, year-out. Clearly, an individual can only afford what he/she has available at the time. And in the earlier part of a career this is likely to be less than in the latter stages. However, by investing as much as possible every year from a young age and having the discipline to not withdraw it under any circumstances, it's possible to generate a surprisingly significant sum of money in retirement.
While that idea may sound obvious, it's difficult to execute in practice. As such, an investor seeking to build a £1m portfolio may be better off focusing on how to maximise their allowance each year, rather than worrying too much about how their stocks are performing on a daily basis. Doing so could make all the difference when it comes to the idea of becoming a millionaire in retirement.
Making a million
Of course, finding stocks that are worth adding to your ISA is a tough task, which is why the analysts at The Motley Fool have written a free and without obligation guide called 10 Steps To Making A Million In The Market.
It's a simple and straightforward guide that could make a real difference to your portfolio returns. It could help you to maximise your annual allowance via the best stocks in the FTSE 100.
Click here to get your copy of the guide - it's completely free and comes without any obligation.