ETNs have the same risks as bonds. There is the risk of default by the issuer. In that respect, an ETN is like an unsecured bond. If the institution goes down in flames, so does your investment.<\/p>
The performance of an ETN is tied to a specific index. The ETN's value fluctuates with that index. In this respect, an ETN is like an ETF.<\/p>
Nevertheless, the ETN's performance can be affected from two distinct directions: the market direction of the underlying index and the fortunes of the institution that issues the ETN.<\/span><\/p>"
}
}
,
{
"@type": "Question",
"name": "Are ETNs Riskier Than ETFs?",
"acceptedAnswer": {
"@type": "Answer",
"text": " Generally, ETNs are considered riskier than ETFs because they combine default risk and market risk.<\/p> An ETF can decline sharply if the market tanks, but it would take a genuine catastrophe to render it worthless. If an ETN's issuer defaults, the ETN is worthless.<\/p>"
}
}
,
{
"@type": "Question",
"name": "Does an ETN Own the Assets in the Index?",
"acceptedAnswer": {
"@type": "Answer",
"text": " An ETN owns nothing but an IOU. It is a promise to repay a loan after a set time period, typically 20 or 30 years. If an investor sells the IOU earlier than the maturity date, the seller receives an amount that is based on the index that the ETN tracks.<\/p>"
}
}
]
} ] }
]