What assets can I hold in a stocks & shares ISA?

There are two types of Individual Savings Account (ISA) - the Cash ISA and the stocks and shares ISA.

There are loads of different types of investments that can be held within a stocks & shares ISA! Most investors stick to stocks and shares - but they're missing out!

The most popular type of investment held within a stocks & shares ISA is a unit trust. These are managed by fund managers and tend to invest in a specific theme such as equity income or corporate bonds. As well as actively managed unit trusts there are also tracker funds that track a specific stock market index such as the FTSE 100 or FTSE 250. Tracker funds tend to have lower annual charges compared to actively managed funds.

Popular unit trust fund managers include Jupiter, Newton, Fidelity and Schroeders. HSBC maintain a portfolio of very low cost tracker funds.

Many unit trusts have large initial charges of up to 5% thankfully some or all of these initial charges will be refunded by many online discount ISA providers.

Unit trusts also have annual charges, and some levy additional performance charges. A good way to compare the cost of holding different unit trusts is to compare their Total Expense Ratio (TER), which takes into account all the charges levied by the fund over the course of the year. A TER may be as high as 1.75% for some specialised unit trusts, whereas a FTSE 100 tracker unit trust may only have a TER of 0.5%. A lower TER will have a significant benefit on the total return when investments are held for a long time period.

Exchange Traded Funds (ETFs) are increasingly popular with private investors, and are an alternative to holding unit trusts within an ISA. ETFs are bought and sold like shares, so they attract dealing charges. Many are based offshore and consequently there is sometimes no need to pay stamp duty when purchasing an ETF.

ETFs generally have much lower annual charges compared to unit trusts.

Two ETF providers popular with private investors are iShares and ETFS Securities. iShares provides a wide range of ETFs that allow investors to buy investments in shares, corporate bonds, commercial property and government bonds (Gilts). ETFS Securities started off by offering ETFs that track the price of physical metals such as gold, silver and copper, as well as agricultural commodities such as wheat and soybeans, livestock and energy commodities such as crude oil, petrol and natural gas.

Most ISA investors stick to UK based investments. But there are a huge number of overseas investments that may be held within a stocks & shares ISA. There are a large number of unit trusts that allow investors to invest money overseas. An increasing number of overseas themed ETFs are also available, such as the iShares BRIC 50 which invests in the 50 largest companies from Brazil, Russia, India and China. Popular overseas investment themes include the BRIC nations, the Asia Pacific region, Japan, Europe and Eastern Europe.

When buying overseas investments it is also possible to diversify into different investment classes. Overseas equity, corporate bonds, government bonds (including emerging market debt) and commercial property are some of the investment themes.

As well as equity and bond investments, it's also possible to invest in commercial property within a stocks & shares ISA. Again, there are many commercial property unit trusts and ETFs. It's also possible to buy shares in real estate companies, such as the many Real Estate Investment Trusts (REITs).

Commercial property funds normally pay dividends, plus there is the chance of capital growth. On the downside it can be difficult to sell commercial property unit trust holdings if the property market collapses and the fund trustees don't want to sell properties at a large loss in order to meet the fund redemption requirements.

Private equity invests in privately owned companies. Often these companies have been bought at knockdown prices and turned around, or are new rapidly growing companies in sectors such as technology.

The iShares S&P Listed Private Equity (IPRV) ETF invests in a number of private equity companies such as Blackstone and 3I Group as their shares can be easily traded.

Hedge funds have been major investors in commodities, and there's no need for the private investor to miss out! It's possible to invest in precious metals using an ISA. The most popular precious metals are gold and silver, although platinum and palladium are also considered precious metals. ETFS Securities has a number of precious metals ETFs that allow investors to invest in precious metals. The bars of the metal are stored in bank vaults so it can be safer than storing precious metals at home.

Alternatively it is possible to invest in unit trusts which have an investment theme centred on precious metals. Gold themed unit trusts include BlackRock's Gold & General fund and the Investec Global Gold fund.

A lot of gold and silver mining companies are also listed on the London Stock Exchange - examples include Randgold Resources (the gold miner) and Fresnillo (a major silver mining company).

The author of this article is not authorised by the UK authorities to give financial advice. This article is for information only does not consitute financial advice. Before making investment decisions consult an independent financial advisor.