Whether an ETF or ETN is better will vary from investor to investor. However, it’s important to understand the potential benefits and risks of both types of exchange-traded securities when deciding where to invest.
For investors looking to track more conventional areas of the market such as stocks and bonds, ETFs could be the better choice. ETFs are essentially investments that are tied to an asset class like stocks or bonds. This makes ETFs very much a core holding asset for most investors. Many investors build all or most of their portfolios via the use of ETFs.
The default risk inherent in an ETN makes ETNs a fringe holding for most investors. It could be very risky to build an entire portfolio of ETNs.
Comparing these two exchange-traded vehicles is very much a comparison of apples to oranges. Both are delicious fruits but are distinctly different. ETFs and ETNs are exchange-traded investments, but that’s largely where the similarities end.