Exchange-traded notes (ETNs) are a type of investment security that has grown in popularity in the last decade due to their convenience, flexibility and ability to track specific investments. ETNs are unsecured debt securities that are structured similarly to bonds, with an important difference - they do not pay periodic interest payments. Rather, ETNs are designed to closely track the performance of an underlying index of securities without the investor being responsible for the individual components of the index.

That index might be based on a wide variety of investments, such as stocks, commodities, or currency. For example, investors may purchase an ETN designed to track the performance of the S&P 500 index or the Chinese Renminbi exchange rate. This enables investors to gain access to a variety of asset classes without individually purchasing and monitoring each security or currency.

The biggest attraction of ETNs is their convenience and flexibility. Investors can buy and sell ETNs on major exchanges, such as stocks, and profit from the difference, subtracting any fees. As a result, ETNs are used to gain access to hard-to-reach investments, taking advantage of opportunities available in sectors such as commodities and foreign exchange markets.

The downside of ETNs is that they typically have higher fees than some other types of investments and have no guarantee of return. Investors should carefully review any ETN before investing to make sure the costs are within their comfort range, the ETN is tracking the index they are interested in and that the investment is suitable for the particular investor.

Overall, exchange-traded notes (ETNs) provide an attractive and convenient way for investors to gain access to certain types of investments and diversify their portfolios. By using an ETN, investors can focus on the performance of an index without having to worry about the individual components, providing investors with substantial freedom and flexibility.