As of 2024, there are over 4,000 ISA millionaires in the UK, most using a Stocks and Shares ISA to build their seven-figure fortunes. It’s not a case of wealthy individuals throwing fortunes into the tax-efficient account. After all, ISAs are restricted to a maximum deposit of £20,000 a year, which would take 50 years to reach £1m.

Instead, it’s a feat primarily achieved by regularly investing capital into markets and letting compounding work its magic. In fact, investors don’t even need to maximise their annual allowance to reach millionaire territory. All it would take is £458 a month when starting from scratch.

Drip-feeding my cash

The stock market’s a vast and diverse arena of opportunities. And depending on where capital’s deployed, investors can achieve a wide range of returns. Looking at the UK’s flagship indices, the FTSE 100 and FTSE 250 have demonstrated two distinct pathways for investors.

The FTSE 100’s historically delivered an average of around 8% in total gains each year over the long term. By comparison, the FTSE 250 sits closer to 11%. But this extra 3% comes at the cost of considerably higher levels of volatility. That may seem like an unfair price to pay. But when compounded over decades, 3% makes an enormous difference.

It’s clear from the table how much of an impact an extra 3% can make. The time required to surpass the £1m threshold’s 28 years instead of 35. And after four decades, investors have more than double the wealth to enjoy a luxurious retirement. For reference, a 3% interest-paying Cash ISA would take just under 63 years to reach £1m.

Pushing returns even higher

Twenty-eight years is still a long time to wait. And investors may be forced to be even more patient since there’s no guarantee that either index will continue to deliver the same level of historical returns. In fact, over the last decade, both indices have notably lagged their historical average.

Fortunately, for investors comfortable with taking on more risk, it’s possible to seek higher returns by picking individual stocks. In the last six months, shareholders of FTSE media giant Future (LSE:FUTR) have reaped almost eight years’ worth of FTSE 250 gains as the shares have climbed more than 80%.

The company’s currently bouncing back from a botched international expansion. And now that economic conditions are improving, so is the group’s cash flow and financial position. Management’s refocusing its capital allocation strategy around its core brands like Go Compare and Livingetc to respark growth.

So far, paired with better economic conditions in the US, this seems to be doing the trick. However, there’s still a long way to go before the business returns to its former status. And if it can’t keep up with the shifting landscape of consumer interests, this upward momentum may potentially reverse.

In other words, stock picking can provide tremendous returns when executed successfully, accelerating the journey to becoming a Stocks and Shares ISA millionaire. But it comes with extra risks that need to be well managed.