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ETFs/ETNs

They consist of a pool (a basket) of assets, such as shares, or it might be bonds, currencies or commodities, or they may track a share index. They help you diversify your investments. They are a low-cost option to spread your risk exposure across various sectors and markets.

ETFs are listed on a stock exchange and can be bought and sold just like shares. They are priced similarly to equities. Unlike investment trusts or mutual funds, they operate with an arbitrage mechanism designed to keep it trading close to the net asset value of the underlying assets.

ETFs are considered low to medium risk investments. With exposure to a basket of assets rather than a single instrument the overall risk is reduced, but prices of ETFs go up, as well as down. Other risk factors come from tax rules, or the risk associated with the specific underlying group of assets, e.g. there are more liquid and less liquid pools of instruments. 

You will have further protection as market makers of ETFs ensure you get a fair price, regardless of the quantity you buy or sell.

They are suited to both individual and professional investors who wish to diversify their exposure. Sometimes individual investors use them as a vehicle to access financial products that are otherwise hard to invest in as an individual.

The investor lends money to the issuer of the ETN, and then receives a return based on the movements in a specific benchmark, such as interest rates, commodity prices, a basket of shares, or bonds or a currency. The issuer promises to pay the amount reflected in the index, minus fees, upon maturity. ETNs also pay regular, stable interest. 

They don’t need to be held to maturity. Investors can buy and sell them at any time. ETNs are highly liquid.

ETN prices fluctuate and are subject to the same market forces as the underlying assets They are riskier than ETFs, because if the issuer goes out of business, they might lose value, the same way any debt security would. They are suited to investors with higher risk tolerance than ETFs.