If you’re new to investing, you might have heard about ETFs, ETNs, and ETCs and wondered what they all mean.

Let’s break it down in simple terms so you can understand the basics and decide which one might be right for you.

ETFs (Exchange-Traded Funds)

ETFs are like a basket of stocks or other assets that you can buy and sell on the stock exchange, just like individual stocks. Imagine going to a grocery store and picking up a basket filled with different types of fruit (apples, oranges, bananas).

An ETF works the same way, except the “fruits” are stocks, bonds, or other assets. The idea is that by buying one ETF, you get exposure to many different things at once, making it easier to diversify your investments.

Key Point: ETFs are great for beginners because they are simple, diversified, and you know exactly what’s in the basket.

ETNs (Exchange-Traded Notes)

ETNs are a bit different. They’re like IOUs issued by a bank. When you buy an ETN, you’re lending money to the bank, and in return, the bank promises to pay you based on the performance of a specific index or asset. ETNs don’t actually own any assets—they’re just promises.

The risk is that if the bank that issued the ETN runs into trouble, you might not get your money back.

Key Point: ETNs are riskier than ETFs because they rely on the bank’s ability to pay you back, but they can offer exposure to more exotic investments.

ETCs (Exchange-Traded Commodities)

ETCs are similar to ETFs but specifically focus on commodities like gold, silver, or oil. So, if you want to invest in something like gold, you could buy a gold ETC.

Some ETCs hold the physical commodity (like bars of gold), while others use derivatives to track the price of the commodity.

Key Point: ETCs are a way to invest directly in commodities without having to buy and store the physical product yourself.