Sorry. I couldn't resist the play on acronyms. If you know what all three in my post title mean, you are highly informed of both modern communication and investing. But, before I digress, what do you need to know about ETFs and ETNs?An Exchange-Traded Fund (ETF) is an investment security that trades like a stock but looks like a mutual fund. Most commonly, ETFs are linked to the performance of a market benchmark, similar to a index-based mutual fund--you get a basket of stocks within a benchmark, such as the S&P 500 Index, in one security.
An Exchange-Traded Note (ETN) is a debt instrument, like bonds, that does not invest in any asset but, like an ETF, it is linked to the performance of a market benchmark. ETNs are not equities or index funds; they combine the qualities of bonds and ETFs.
Therefore, ETFs and ETNs carry different risk attributes but fulfill the same basic function. ETNs can be more secure than ETFs because of the debt structure but will carry similar credit risks as bonds. ETFs carry similar market risks as stocks and mutual funds.