How to become an ISA Millionaire - ten lessons and an ebook by Leon Boros

Thursday, Apr 28 2016 by
16
How to become an ISA Millionaire  ten lessons and an ebook by Leon Boros

Two years ago, Leon Boros wrote an article for Stockopedia that recounted how he and his wife had built an investment portfolio worth more than £1 million. It was a compelling story that attracted tens of thousands of readers and generated a huge response. It was a very powerful reminder of how effective it can be to invest for the long-term using tax-efficient Stocks & Shares ISAs.

So how has Leon’s investing journey progressed since then? The great news is that he’s written an extensive update in a 26-page e-book entitled, Ten key investing lessons from an ISA millionaire.


The miracle of compounding

Without giving the whole game away, the answer is that the portfolio performance has accelerated, far outstripping the FTSE All Share and SmallCap benchmarks. The compounding - or ‘snowball’ effect - that Leon originally credited for super-charging his portfolio, has continued apace.

The backdrop to all this, of course, is rather mixed. With interest rates jammed at half-a-percent for the last seven years, it’s been a pretty dismal environment for savers. Yet, as Leon points out, the lion’s share, or 77%, of contributions to Individual Savings Accounts in 2014/15 was allocated to cash. To put that another way, only £17.9bn of the £79.5bn tucked away in ISAs found its way into stocks and shares accounts.

In turn, figures show that the vast majority of capital channelled into the stock market by individual investors is actually routed through open ended investment companies and trusts. It seems that the majority of the British public still prefer others to manage their money. That’s despite Leon’s note that there is very little evidence that many ISA millionaires choose this route.

Ten key lessons

In his latest update, Leon explores ten key lessons learned from managing a self-invested portfolio of individual shares. Among the points he raises are:

  1. Compounding your way to millions, tax-free
  2. Don’t assume bigger money is smarter money
  3. Meeting management and networking
  4. The younger you start, the better
  5. Use a quantitative approach to filter investment opportunities
  6. Run a concentrated portfolio when you are young
  7. Cut losses and run profits
  8. Avoid blue sky stocks and focus instead on value, reasonably priced growth and quality
  9. Never forget the importance of liquidity and knowledge
  10. Have you got what it takes?

For Leon - who runs his own corporate finance consultancy and is a former non-executive director of ShareSoc - there…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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10 Comments on this Article show/hide all

iwright7 28th Apr '16 1 of 10

Leon's is an interesting new article and my eye was taken by the ROTA mention:    

.....My preference is the Return on Tangible Assets (ROTA). This metric identifies companies which require relatively modest amounts of tangible assets (e.g. plant and machinery, stock, cash or trade debtors) to grow or preserve a business franchise. It is a great predictor of companies that should be able to generate strong Free Cash flow in the future. I typically look for companies generating a ROTA of more than 30%..

In the past I have used a simple but effective CROIC >30% screen combined with a Current Ratio >1.2  which delivers 77 Quality companies to select from, but I can't find ROTA in the Stocko screening criteria.  Suggestions for the ROTA calculation, or alternative metrics please such as maybe adding ROA >30% which drops the selection number to 9, including Bioventrix and Hargreaves Landsdown both of which are mentioned in Leon's article?   Ian




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herbie47 28th Apr '16 2 of 10
1

In reply to post #129485

ROTA is not on the screening options or information. There is ROA %. 

A few qualify >30, Plus500 (LON:PLUS), Hostelworld (LON:HSW), MAB1, FDM (Holdings) (LON:FDM), Entu (UK) (LON:ENTU).

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Noodle Hat 28th Apr '16 3 of 10
3

On cutting your losses and keeping to your stops this leapt out at me from the ebook, says it all really:

"It is worth noting that just one 2 bagger pays for five losing trades if losses are cut at 20%. So it is possible to
have a win ratio of just 20% and still not lose money if you are disciplined about cutting losses"

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hayashi22 29th Apr '16 4 of 10
3

A very interesting read. Is not the key here the move to sell down and go into cash in 2008?

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TraderTim 30th Apr '16 5 of 10
4

Fantastic read!

Worth it just for the quote "Investing in a Cash ISA is rather like buying a mansion but choosing to live in the garden shed"!

Blog: Trader Tim
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Andrew L 6th May '16 6 of 10

Didn't seem to be anything new in those ten points. Miracle of compounding, for example, is fairly generic. Very little on actual specific investment ideas/approaches/advice.

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vik2001 6th May '16 7 of 10

In reply to post #130373

totally agree would have been good to read about his investment picking and approaches. everything else was defo generic

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Boros10 6th May '16 8 of 10
3

In reply to post #130373

This is a fair criticism. It is alway hard to know how to pitch these things. The ebook was written for ShareSoc to attract new members and so was drafted with the widest potential target audience in mind.

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Andrew L 7th May '16 9 of 10
3

In reply to post #130424

Leon, thanks for taking the feedback on the chin. I am a bit of a devil's advocate on these things. Obviously you have done extremely well to get a 19% rate of return. Looking at your first article and I'm not sure I agree with your assertion that anyone can be a great investor: "I believe it should be possible for a private investor to significantly outperform both the market and most fund managers."

Possible yes but I would argue that it isn't very probable. In my view, only a very small percentage of private investors would have the skill set, the time and psychological temperament to run a complete portfolio. I would suggest a default for the bulk of assets (an index tracker or a few good active funds) and then picking stocks for a small part of the portfolio if there are good ideas.

Personally, I like Fundsmith as an active fund and I would disagree with the argument that all active funds are not going to do well.

I agree on using quantitative tools to pick stocks as a potential aid. However, it isn't foolproof.  A fair few stocks on Stockopedia sometimes had very high rankings and then fell into serious decline. Asian Citrus and a few others. Also when it comes to story stocks generally yes these do badly but there are also good story stocks.

I would be very cautious about the average Joe deciding to manage all their capital themselves. The fact that the people who do this very well, such as yourself the naked trader etc, get such attention suggests that most private investors don't do well managing money themselves.

Lastly, most people aren't into investing!! They would rather play golf or whatever. I don't think the average Joe on the street would be as talented as investing as you have been!!! For example, I read that you sold out completely in March 2008. That was a masterstroke. Not sure that most private investors did the same.

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jonesj 9th May '16 10 of 10

In reply to post #130493

To be fair, Leon stated it is possible for a private investor to outperform, without in any way implying it's probable. He also explained some good reasons why outperformance is possible.
Overall, I found the e-book to be very interesting & helpful.

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