ETNs: What Every Investor Should Know

There was a time not long ago when nobody knew what an ETF was. But as of Nov. 30, assets in the U.S. exchange-traded fund industry totaled approximately $739 billion, after climbing $50.3 billion or 7.3% during the month. This marks an all-time, month-end high, according to State Street Global Advisors.

Now, just when you've gotten accustomed to ETFs, you've probably begun hearing a bit of buzz around their cousins, the ETNs: exchange-traded notes. The first ETN was introduced in 2006, and since then, more than 60 have been issued, with more in the works. These financial securities are growing in popularity, according to Colby Wright, Ph.D., assistant professor of finance at Central Michigan University, and co-author of the paper, Exchange Traded Notes: An Introduction. But Wright says ETNs are often confused with ETFs, and seem to be largely misunderstood by the general investing public -- and even by institutional investors and academicians.