ETN’s or Exchange Traded Notes and ETC’s or Exchange Traded Commodities are investment products you can buy and sell on the stock exchange, just like shares. Together with ETFs (Exchange Traded Funds), those are also commonly called “trackers”. Instead of buying part of a company, an ETC/ETN tracks the value of something else. For example, ETC’s track commodities such as raw materials or precious metals.
ETN’s/ETC’s are complex debt instruments issued by a financial institution that aims to replicate the underlying asset as closely as possible, opening for investors the opportunity to invest in market instruments that are often difficult to access. In terms of ownership you own a debt obligation from the issuer, without any claim on the underlying assets.
ETN/ETCs are complex products, this means that a certain knowledge and experience level is required before being able to purchase them. This will be assessed via a specific questionnaire.
As with any investment, there are always risks involved. As ETNs and ETCs are debt instruments, there is a risk, among others risks, that the issuer may default in whole or in part, which could negatively affect the value of the instrument. Also, some tracked values are known for being very risky including, among other risks, high volatility risk, which means that you can lose part of or all of your investment.
You invest in a financial product that follows the value of an asset.
There are multiple differences, but we highlight the most important ones in the table below:
| ETN/ETC | ETF | |
|---|---|---|
Structure | Unsecured debt instrument issued by a financial institution | Fund* holding actual assets (stocks, bonds, etc.) in a portfolio |
| Credit risks | Risk that the issuer may default in whole or part influencing the value | Issuer risk still exists but is lowered for EU ETF due to EU laws requiring that assets of investors are held separately |
| Use cases | Used for niche exposures | Used to invest in, for example, all equities of an index or a basket of equities in a single transaction |
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Need more information? Watch our video on how to place orders in ING Self invest here or read our frequently asked questions about ING Self Invest.
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