Many of us play the lottery every day chasing the seemingly impossible dream of becoming a millionaire. Spend £1 a day on the lottery and you might enjoy the odd small win, but the chances are you will lose over the long run. You will have a 500 to 1 chance of winning the main prize once over 77 years. Save £1 a day at a 7 per cent annual return and I can guarantee you will be a millionaire after 77 years.* This shows the difference between gambling and investing. The gambler will always lose in the long run, but the investor – if they are prudent – will always win.

Yes I know, 77 years is a very long time and most of us will be long dead before we ever get a chance to enjoy the fruits of our hard saving. So what can you do to cut those years down to become a millionaire sooner? How can you become an ISA millionaire?

1) Be Disciplined and Patient

The first thing you will need is patience. You need to realise that you’re not going to become an ISA millionaire overnight. A basic rule of investing is not to be greedy. A classic mistake is to put all your money into one stock, fund or country. This exposes you to an unnecessary amount of risk and will usually end in tears.

2) Have a Long Time Horizon

Following on from the first point, you will need a long investment time horizon. This will give your investment the chance to grow over time and allow for the magic of compound interest (interest on interest) to take hold. It will also allow you the freedom to be more aggressive with your investment, as you won’t need to worry about having to withdraw your money in the near future.

3) Contribute as Much as Possible

The third thing you will need to do is contribute as much as possible and make use of your full ISA allowance where you can. Obviously the more you contribute, the faster you will reach your goal. This won’t be possible for everyone, but as shown in the examples at the bottom, it is still quite possible to become an ISA millionaire with smaller contributions. One thing you must ensure is that you pay off any high interest debts you have before you invest.

4) Invest in Equities and Avoid Cash

Equities have consistently beaten all asset classes over the long-term, although they are more volatile. Please note it is not appropriate to hold all your assets in equities if you wish to withdraw your funds in the near future. Investing 100 per cent in equities should only be for someone who won’t need to touch the investment for a very long time and has the specific goal of becoming an ISA millionaire.

5) Do Research

Do spend time researching the best fund managers. This can be done relatively simply at websites such as fundcalibre.com and is much easier than researching individual stocks. The annual rate of return you achieve on your investments will make an enormous difference to how quickly you achieve your goal. Neil Woodford, one of Britain’s best known investors has achieved an annual return of 13.2 per cent for over 26 years.* To put this into perspective go back to our saving a pound a day example above. If you saved £1 a day for 77 years at 13.2 per cent instead of 7 per cent, you would end with a lump sum of £43.8m not just £1m.*

Billionaire investor Warren Buffet achieved a 19.7 per cent annual rate of return between 1965 and 2012.** Now you can see why he’s a billionaire!

6) Don’t be Greedy

Whilst it’s true that good returns make a huge difference to your final lump sum, don’t try and achieve the impossible. Woodford and Buffet’s performance numbers are exceptional and it is extremely unlikely you will be able to match them. Remember they achieved less than 20% a year so forget any ideas of trading in and out or doubling your money in a couple of weeks. Aim for a sensible achievable return like 7%. Under no circumstances should you put all your portfolio into one or two individual shares.

7) Don’t Over Trade

This comes back to the first point about being patient. Predicting market movements is extremely difficult. Over trading will be a waste of your energy and will only give money to your broker. Don’t try and time the market. This could cause you to miss out on vital returns. Have a review of your portfolio every few months and cut funds that are not performing as you anticipated.

8) Don’t Panic

Prepare yourself for market stress now. Sadly, you won’t make a 7 per cent return every year. Some years you might make 20 per cent, other years you might lose 10 per cent. If you’re investing in equities for a long period there will definitely be times when the stock market declines by 30 per cent 40 per cent even 50 per cent or more.  Panicking out at the bottom of these declines is a classic investment mistake and will stop you reaching your goal. Sharp falls are often followed by a rebound and those who have sold in panic will miss out. Prepare for this now so that when chaos is raging around you can calmly continue to implement your plan.

9) Invest Globally

You want to take advantage from growth all around the world. Investing too heavily in one area could cause your investments to struggle if that one area does poorly. By investing globally, you can be sure to take advantage when different parts of the world do well.

10) Re-invest All Your Dividends

Make sure you re-invest all your dividends. This is absolutely crucial and if you don’t do this you will have little chance of achieving your goal. Re-investing your dividends allows the magic of compound interest (interest on interest) to take hold, whereby the dividends you’ve re-invested generate further dividends in the future.

If you invested the full £15,000 a year into your ISA and achieved a 7 per cent annual return you would finish with over a £1,000,000 after 25 years. Start with nothing on your 20th birthday and you could be a millionaire by the age of 45 with this plan. Not bad, but this does assume you save £15,000 a year which is by no means an easy task. However if you invested £5,000 over 40 years at a 7 per cent annual return you would also end up with over a million. Becoming an ISA millionaire is something we can all achieve if we put our minds to it.