What is an Exchange-Traded Fund (ETF) and Exchange-Traded Note (ETN)?
An ETF is an index-tracking tool that is traded in a public market like the JSE.
ETFs are composed of a basket of securities or assets that seeks to mirror the performance of an index. In other words, it's a fund however the basket is listed and traded in the stock market. ETFs typically focus on a segment of the market, such as technology, energy, real estate or on a geographical location such as Japan, USA or Emerging Markets.
ETFs are traded on the stock exchange just like a share, meaning you can buy and sell an ETF like you would an equity share.
An ETN is a listed debt security that is issued by a financial institution like FirstRand Bank.
It tracks the value of a basket of shares or an individual share, for example offshore companies like Amazon or a commodity like gold and trades on stock exchanges like the JSE. An ETN's price fluctuates based on the underlying index performance. Meaning if an ETN is purchased, the value of the ETN will fluctuate based on the performance of the underlying share value itself.
Investors do not physically own any shares; however, they obtain exposure to the company's performance based on the fluctuating ETN price.