An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE or a sector or commodity. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.
Exchange-traded notes (ETN) are notes issued by a broker (mostly Barclays) that trade like stocks. Most ETNs use derivatives to bet on the upside or downside of the underlying index or security. For example, you can purchase a security that will give you 200% of the change in the price of gold or another security that is 200% negatively correlated with the price of gold (if you believe the gold price is going to fall). These securities are available for a wide range of indices and commodities.
