Description

• ETFs are used as an alternative to purchasing mutual funds. ETFs are funds containing several different stocks. They trade similarly to stock trades, and have low management fees compared to mutual funds. ETNs are senior debts issued by banks, and are similar to bonds.
  
  

Risk

• ETNs are susceptible to more risk than ETFs because if the issuing bank fails, the money may be lost. ETFs do contain risk, but like a mutual fund, they are comprised of many different stocks. The stocks are typically diversified within the ETF, which helps prices if a particular industry has poor performance results which cause stock prices to plummet.
  
  

Details

• ETNs track underlying indexes; whereas ETFs do not. ETNs are debt issued by a bank, so the underlying performance of the ETN is exactly that of the issuing bank. ETFs cause capital gain distributions each year, causing tax consequences to investors. ETNs do not receive any capital gains until the ETN is sold; therefore taxes on ETNs are deferred until that time.