Maybe you own one or more exchange-traded notes (ETNs). They look a lot like exchange-traded funds (ETFs). What most people don’t know: aside from the fact that ETFs and ETNs both trade on exchanges, they’re entirely different species.
- An ETF is an “investment company,” a corporation or trust legally separate from the company that sponsors and sells it. If the sponsor goes bankrupt, the ETF survives under new management.
- An ETN, on the other hand, is a kind of bond. Instead of owning a slice of a big portfolio, you have loaned your money to a bank. The bank promises to repay you based on an index. They explain all this in the disclosure documents, but few people read them.
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