| Conventional wisdom holds that the decision to invest in an exchange-traded note depends on a straightforward calculus, the trade-off between credit risk and the ETN's tracking and tax benefits. Unlike an exchange-traded fund, an ETN is essentially an uncollateralized loan to an investment bank, with all the risks that entails.
On the other hand, the banks promise exposure to an index's return, minus fees, regardless of how hard it is to own the index's underlying assets. On top of that, many (but not all) ETNs are taxed like stocks, regardless of the ETN's true exposure, thanks to a quirk in U.S. tax law...............................................Full Article: Source
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