Achieving financial freedom is among the aspirations of many people around the globe. Freeing yourself from the burden of debt brought about by mortgages, loans made and rising interest rates allow you to enjoy your life while you are still in your prime. While there have been many claiming to be paths towards achieving financial freedom, Exchange-Traded Notes or ETNs are among the few that has made it possible for investors. What is an ETN and how can it help you realize the financial freedom that you have longed for many years now?
An Investment Worth The Risk
While ETNs have always been looked upon by market watchers as a risky venture, it is one investment that is worth the risk. A quick search online about what an extend-traded note is would immediately inform you that it is an unsecured and unsubordinated debt security issued by underwriting banks. Its returns are oftentimes pegged to the performance of a market benchmark, or in some cases, market strategy. Like most debt securities, this type of investment also has a maturity date. The one thing that makes it risky in the eyes of many is that the only thing backing it is the credit of the issuing bank. When you buy an ETN, the underwriting bank guarantees to pay the amount of money shown in the index, less investor fees, upon the note’s maturity.
Investment Risk Realities
The truth of the matter is that no investment is devoid of risks. This means that the moment you invest your money in a given venture, there is always the possibility that you might lose it. This is where your common sense and better judgment come to play. In the case of exchange-traded notes, would you opt for an ETN issued by an obscure bank or would you rather have one handed-out by a bank with solid credentials? Naturally, you and everyone else would go for the latter. This way, you would have better chances of making profit at the end of the maturity date.
The Bright Side
There are various reasons why ETNs can be the path towards your own financial freedom. For starters, it features perfect index tracking. Investments like bonds, shares of stock or commodity futures oftentimes make adjustments in order for them to accurately track their underlying indexes. As such, it often results in additional costs on the part of the investor. Since ETNs are not backed by these types of securities, additional costs that results from tracking errors are fully eliminated. In short, the performance of your ETN, less fees, will accurately mirror how the underlying index performs.
Flexibility Is The Key
Another wonderful feature of ETN is its enhanced flexibility and easy access to various asset classes. The basic framework of an ETN allows it to become almost fully flexible as an investment instrument. It can become involved in high-commission investments without inviting additional costs that usually comes with such time of investment. ETNs can also easily manage investments in currencies or commodities in countries where access to foreign investments are limited.
Your Capable Partner towards Financial Freedom
In some cases, taxes become stumbling blocks in your journey towards financial freedom. This is where ETNs can give you the most advantage because it features significant tax advantage over regular portfolio investments. Since ETNs do not have actual holdings in terms of stocks or bonds and other forms of security, investors are not subjected to capital gains taxes which are computed annually. While you may still pay short-term capital gains tax if you sell your ETNs in less than a year, you will not be required to file the related tax form if you hold on your ETN for a longer period of time.
A More Than Doable Option
Investing in a physical or intangible asset always comes with risks. Such risks may vary though and would oftentimes depend on many factors, many of them beyond the control of the investor. In the case of an ETN, the only thing that the investor has to make a determination about is the trustworthiness of the issuing bank in terms of ability to meet its obligations and its solid financial status. Once these two items have been verified and checked, you as the investor will definitely find it worth your while to engage in this type of investment.