Exchange-traded funds (ETFs) have become wildly popular over the past decade or so, with current growth eclipsing that of more traditional mutual funds. Therefore, it is important not to confuse them with similarly named exchange-traded notes (ETNs). They are more different than similar, so it is important to understand both of them before making an investment decision in either.
Here’s a quick primer on ETFs: Like traditional mutual funds, an ETF represents a basket of assets such as stocks or bonds. Unlike a mutual fund, investors cannot buy ETF shares directly from an investment company. Instead, they buy them from other investors, just as with stocks. That has two implications: