Comments on: Investment Idea: Exchange Traded Notes

By: Trade Carbon Emission with ETFs

Trade Carbon Emission with ETFs — Wed, 08 Jul 2009 02:45:14 +0000

[...] Global Carbon ETN (GRN) (learn more about exchange-traded notes) tracks the Barclays Capital Global Carbon Index Total Return (”BGCITR”), an index that [...]

By: Laura Shelting

Laura Shelting — Fri, 30 Nov 2007 16:23:08 +0000

Merrill Lynch now offers Exchange Traded Notes as well as Barclays iShare.

By: Sun

Sun — Mon, 23 Jul 2007 05:14:52 +0000

choobro: I feel that any fund that tracks an index, whether it’s tracking or mirroring, will have to engage in buy and sell if the fund’s performance wants to be measured by that index. Tracking won’t necessarily make the adjustments smaller or infrequent than mirroring.

By: The Sunday Review #30: About Bad Advertisements And Debt

The Sunday Review #30: About Bad Advertisements And Debt — Sun, 22 Jul 2007 13:01:15 +0000

[...] Investment Idea: Exchange Traded Notes by Sun @ The Sun’s Financial Diary. ETNs are debt securities, not equities. Thus, like notes and bonds, a ETN has a maturity date. [...]

By: Friday Finance Findings For July 20th : Generation X Finance

Friday Finance Findings For July 20th : Generation X Finance — Sat, 21 Jul 2007 02:13:39 +0000

[...] Exchange Traded Notes – Well this is new to me. Similar to ETFs yet different as well. This new debt instrument could provide additional diversification for many portfolios once they become more widely established. [...]

By: choobro

choobro — Fri, 20 Jul 2007 13:37:16 +0000

TFB: what you said is very true but you left out one minor detail. Over the long term the ETF that tracks similar to an index will out perform an ETF mirroring an index when you adjust for costs. The bying and selling costs associated with a fund trading enough to mirror the weighting in the index it is tracking would eat into the investors return. By simply getting close to the index they find a healthy balance.

By: Acero

Acero — Thu, 19 Jul 2007 01:27:20 +0000

Hey Sun, read your blog for a long time, only lurked until now. You certainly have a lot of good work going on here, interesting with every post.

Do you have any business notes yourself, not ETNs but actual notes? I was reading about them awhile back and senior secured notes, such as the ones that RiteAid put out a few months ago at 10% or better seemed like a interesting investment vehicle. Not 100% safe, but what is? Only reason I did not invest is that I couldn’t find any way for an individual to buy them. Any thoughts on this type of investments?

By: Sun

Sun — Wed, 18 Jul 2007 23:45:11 +0000

TFB: What I want to say actually is that since ETN is 100% correlated with the index, investors will get whatever the return the index has. For ETF that tracks the same index, however, the 95% correlation could result in a better performance, and it could lead to slightly inferior result as well. Over the long term, as you said, if ETF’s performance fluctuates around the index, then the average return could be the same as the index. However, if ETF is consistently underperform its benchmark by even 0.1%, its long term performance cannot be better than ETN’s.

By: TFB

TFB — Wed, 18 Jul 2007 17:49:11 +0000

“In terms of returns, since all the ETNs Barclays now offers have 100% correlation with their respective indexes, investors could get better return from ETNs if they hold the securities till maturity than from the ETF counterparts because, generally, ETFs guarantee at least 95% correlation with their underlying indexes.”

This is not true. Correlation has very little to do with returns. You can have a security that vary a bit from the index from year to year, sometimes a little higher, sometimes a little lower, and in the end comes to the same value as the index after 30 years. Or you can have two securities with a big difference in returns but have near 100% correlation between the two. Just try it in Excel. Do one series with 10% increase every year, another series with 7% increase every year, then use the CORREL function on them.