High Level Rules

The postings derive from personal experience and knowledge. Do not believe everything and whatever you read. Think for yourself and check the validity and accuracy of the given information provided. Please note that the numbers, tables, pictures and graphs are for illustration purpose only. All information shouldn’t be treated as any recommendation. Past performance are not an indication of future performance. Please be reminded and become aware that all investments have risk. Do seek advice from your professional investment and financial consultants.

Price deviations can occur for a variety of reasons. For example, an ETN might trade at reduced to its indicative value if the issuer suspends issuance of new records. Paying a premium relative to the indicative value to buy the ETN in the supplementary market-and then selling the ETN when the market price no more displays the premium-can business lead to significant losses for an buyer.

For this reason, before trading in the secondary market, it’s a good idea to compare an ETN’s shutting and intraday indicative values with the market price. Credit Risk. ETNs are unsecured debt responsibilities of the issuer. If the issuer defaults on the note, investors may lose some or all their investment.

Market Risk. ETNs are market-linked: the value of the ETN is largely influenced by the value of the index it tracks. As an index’s value changes with market forces, so will the worthiness of the ETN in general, which can lead to a lack of principal to investors. Thus, in addition to credit risk, an ETN subject areas investors to advertise risk, which is not assumed by investors in traditional corporate personal debt generally.

Also, be sure you understand what the index being tracked by the ETN is measuring-for example, some indices reflect a dynamic trading others and strategy derive from futures marketplaces. Also, some indices reflect “total returns” while others might not. Liquidity Risk. Although ETNs are exchange-traded, some liquidity is carried by them risk.

As with other exchange-traded products, a trading market might not develop. In addition, under some circumstances, issuers can delist an ETN. Should this happen, the market for the ETN can dry completely up or evaporate. Price-Tracking Risk. ETNs like other exchange-traded products, typically trade at prices that carefully track their indicative values, but this might not necessarily be the case. When trading in the secondary market, check market prices against indicative values, and become cautious with buying at a price that varies from shutting and intraday indicative values significantly. Holding-Period Risk. Some ETNs, some leveraged particularly, inverse and inverse leveraged ETNs, are designed to be short-term trading tools (with keeping periods as brief as you day) rather than buy-and-hold investments.

Because of the consequences of compounding, the performance of the products over very long periods can differ significantly from the stated multiple of the performance (or inverse of the performance) of the root index or benchmark during the same period. Call, Early Redemption and Acceleration Risk. Some ETNs are callable at the issuer’s discretion. In some instances ETNs can be subject to early redemption or an “accelerated” maturity day at the discretion of the issuer or one of its affiliate marketers.

  • Dstribution taxes should be taken into into consideration when computing net returns from
  • Turnover of £632,000 or less
  • Making the recommended changes to your investment accounts
  • CAPM = Capital Asset Pricing Model

Since ETNs may be called at any time, their value when called may be less than the market price that you paid or even zero, producing a incomplete or total loss of your investment. Conflicts of Interest. There are always a true variety of potential conflicts appealing between you and the issuer of these products. For instance, the issuer of the notes may engage in trading activities that are at odds with investors who hold the notes (shorting strategies, for instance). Search the ETN’s prospectus for just about any mention of “conflicts of interest” and assess whether these issues are worth the risk.

Who is the issuer? Once you know, be sure to analyze the issuer’s credit history and finances. If the issuer is exchanged, use the SEC’s EDGAR database. Take into account that ETNs aren’t registered investment companies and therefore are not at the mercy of the same sign up, disclosure and other regulatory requirements as most ETFs or mutual funds. What standard or index does the ETN track?