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Become a NISA millionaire in just 25 years

17th June 2014 Print

The new ISA allowance coming into force on 1st July means that savers could become ‘NISA millionaires’ in fewer years than ever before.

Fidelity Personal Investing has calculated that savers who use their full new ISA limit could be ISA millionaires – with £1m sheltered from the tax man – in their 25th year of investing instead of 29 years with the current allowance of £11,520.
Dubbed the ‘single, super ISA’, the NISA was borne out of this year’s Budget changes. It will be a simpler, more flexible version of the ISA as we know it. In addition to the increased  allowance, investors will be able to combine cash and stocks and shares savings, giving them freedom to hold a far broader range of investments  within this tax efficient wrapper.  With just three weeks to go until NISAs arrive, now is a good time for savers to consider if their savings are working hard enough to meet their goals.
While there are few ‘quick fixes’ to becoming a NISA millionaire, the top tip is to maximise your allowance and properly diversify your portfolio.  Most investors want the best of both worlds: growing their income quickly without taking too much risk and eroding their initial capital base by losing money. Unfortunately these two requirements are somewhat mutually exclusive – lower the risk and your investment return is likely to be reduced too, up the risk and your returns are likely to increase but so to do the risks of losing money.
Maike Currie, of Fidelity Personal Investing says: “Investing in cash is your least risky option. However it is often said that no one ever became a millionaire by leaving their money in a cash account, and with interest rates at historic lows this is more true today than ever. While it is important to hold some cash as a ‘rainy day’ fund and some disposable cash to take advantage of new investment opportunities, the beauty of a stocks and shares ISA is that it allows you to invest in a wide range of investment vehicles such as bonds, equities and funds. The latter is a more risky option than a cash ISA as your money will be exposed to the vagaries of the stock market. However, the true value of a stocks and shares ISA will manifest itself over the long term. Over a long time horizon the ups and downs of the stock market can be smoothed out. The figures below show that investing in equities would have earned you thousands more, compared to saving through cash over the past ten years. For most savers, that will be too big a discrepancy to ignore.”         
Fidelity calculates that if a saver had invested £15,000 into the FTSE All Share index over a 10 year period   they would now be left with £35,218.50. If, however, they had invested £15,000 into the average UK savings account over the same period, they would be left with £16,582.65.  That’s a difference of £18,635.85.