Can I hold ETFs in an ISA?

Exchange Traded Funds (ETFs) are increasingly popular investments. The good news is that they can be held in an Individual Savings Account (ISA)!

The ISA needs to be a stocks and shares ISA, and it has to allow stocks and shares to be held in it, rather than just unit trusts.

A large number of ETFs are traded on the London Stock Exchange (LSE). You should check with your ISA provider to see what ETFs are available.

If you are looking for a stocks and shares ISA provider then by all means talk to your bank. However, high street banks usually have fairly basic stocks and shares ISAs, and their charges can be high! An alternative is to open an ISA with an online discount broker such as Hargreaves Landsdown or the Motley Fool. Here's an article about finding the best ISA fund supermarket for you.

If you want to hold a lot of ETFs in your ISA then be sure to check your ISA provider's dealing charges! Every time you buy and sell an ETF you need to pay a dealing charge. Some ISA providers charge a fixed fee per trade, others charge a tiered amount based on the value of the ETF you are buying or selling. There is also stamp duty to pay when buying stocks and shares, although most ETFs escape stamp duty by being registered outside of the UK.

• ETFs have low annual management charges compared to unit trusts and other investments. ETF annual charges for a corporate bond ETF can be as low as 0.3%, whereas annual charges for a typical corporate bond unit trust are between 1.0 and 1.5%!
• Many ETFs pay out dividends.
• ETFs that track stock market indicies can have extremely low annual charges. While we're talking about a few fractions of a percent here, if you're holding an investment over 5 years or more those small percentage differences eventually make a huge difference to how much money you end up with!
• ETFs can be used to invest in sectors not normally open to private investors, such as private equity and commodities.
• ETFs can be bought and sold quickly, with none of the delay associated with selling unit trusts via a fund manager. You also get to know the price you're buying and selling at.

Here are a few links to my hubs about ETFs...

5 ETFs that will turbocharge your ISA! This article has information about some of the more popular ETFs that can be held in your ISA.

5 Gold ETFs that will turbocharge your ISA! Since the dawn of mankind, humans have realised the importance of gold as a preserve of your wealth. Did you know that you can hold gold in your ISA? That's gotta be safer than having a house full of gold bars! You can even get an ETF that stores the gold you have bought in Swiss bank vaults! How's that for peace of mind?

5 Lyxor ETFs that will turbocharge your investments. Lyxor is an ETF provider that has a number of interesting ETFs. Lyxor ETFs in the energy and water sectors are particularly popular - both of these sectors should be important in the 21st century.

How to Profit from Dividend Paying Corporate Bond ETFs. Corporate bonds are a useful holding within an ISA, particularly as the ISA tax free wrapper means the interest from corporate bonds are more tax efficient.

Turbocharge your ISA with these oil ETFs. The high oil price means that private investors are always interested in an investment that can be used to benefit from those ever increasing petrol and heating oil price rises!

The Secret of Income Generating Exchange Traded Funds (ETFs). An article about some of the best ways to get an income from holding ETFs within an ISA.

The author of this article is not authorised to give financial advice. This article does not consitute financial advice. Before making investment decisions consult an independent financial advisor.