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 Replies: 8 / Views: 1,439 |
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Rest in Peace
United States
9104 Posts |
ETF or ETN - Not the same thing! Here is the difference in a nutshell ... When you buy an ETF, you receive partial ownership of an independently organized entity -- a "fund." By pooling your money together, you and the other owners do something together that would be hard to accomplish individually. When you buy an ETN, you've loaned your cash to the issuing bank. All you "own" is an unsecured liability. That's banker talk for an "IOU." http://www.moneyandmarkets.com/does...-money-48069 for more detail and the usual advertising. |
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Pillar of the Community
United States
4008 Posts |
Exactly right, Fredd. An ETN is nothing more than a promissory note... a promise to return some or all of your invested money plus a share of any earnings at the time the ETN is sold. Market conditions at that time will determine what amount is received.
Also, if an ETN or some of its holdings go bankrupt, ETN holders are not owners or even bond holders, so are last in line to get any of the assets of the folded investment or company. It's not likely that there would be much left to pick over once the owners and bond holders have had their shares.
Because of this, I choose not to invest in ETNs.
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Valued Member
United States
320 Posts |
I'm not even sure about an ETF... but now I will never do an ETN, that's for sure!
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Valued Member
United States
158 Posts |
I buy and own precious metals only. ETF/ETN transactions are recorded and can be tracked. My PM purchases are made with cash and leave no paper trail. Am I paranoid ? Nope. Just careful.
"I love my country, but I fear my government."
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Valued Member
United States
362 Posts |
I have a few shares of gld, I got them at thr beginning of the year when they were only 130$ a share. Its very liquidable, easy to hold, easy to sell and foloows pretty closely with the spot charts. But you do have to pay a 28% tax on your profits...
Although you are suppose to do this with the physical stuff too, but I feel like a lot of people "forget" to report it.
But I own a little more of the physical stuff. But my stash is pretty meager compared to some peoples!
But I dont understand peoples fear of PM ETFs, some people fear they are gonna crash, but I dont think so, but to be honest I'm not intelligent enough on the matter to make a real educated opinion lol
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Pillar of the Community
Australia
7096 Posts |
Why on earth would anyone be so naive to buy "paper" pm's when you can get the real thing easily enough.  To heck with the 28% tax and the very real risk of loosing the lot to some unscrupulous dealer who realy dosn't care about making money for you, Just as long as they get their cut. Me, I like the shiney stuff you can hold in your hand anyday over scammy paper deals  |
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Pillar of the Community
United States
4008 Posts |
Quote:
Why on earth would anyone be so naive to buy "paper" pm's when you can get the real thing easily enough Well, for two reasons. First, because it is VERY easy to buy and sell these with a few mouse clicks... unlike selling physical metal, which requires much more time and effort to do. Second, many people have money in IRAs and 401Ks that they want to invest in something besides stocks, bonds, or cash and a metals ETF allows them to do that where they otherwise could not. Not saying that these are great reasons, only that they ARE reasons. I own both physical and ETF silver and gold. Both have their advantages and disadvantages. Whether one is better than the other in your personal situation depends entirely on the outcome... which hasn't happened yet!  Of course, there are ETFs and then there are ETFs! I prefer the physical metal ETFs, such as SIVR, the Sprott physical metals funds, and SGOL. I would not put a rusty farthing into either SLV or GLD... and for the very reasons we all know. |
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Valued Member
United States
52 Posts |
Wholeheartedly agree with you, ED. You make a great point. I have always bought physical just to know where my money is. My 457 at work doesn't even offer a PM portfolio, so I offset using physical PM. Of course, it helps that I also am a coin dealer and can easily move large quantities when needed. But I think you are right when you say what works is based on your personal situation and ability to make the right moves a the right times.
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Pillar of the Community
United States
4008 Posts |
Quote:
But I dont understand peoples fear of PM ETFs, some people fear they are gonna crash, but I dont think so, but to be honest I'm not intelligent enough on the matter to make a real educated opinion lol To be truly worth investing in, IMHO, a metals ETF must be 100% backed by physical metal AND it must be independently audited such that the amount of metal on hand is regularly verified by the independent accounting firm. This metal must be allocated to each and every investor who holds it and not pooled into large accounts wherein the investors only own shares or loaned out to others which introduces considerable counter-party risk. Only a few PM ETFs can say this. Can the SLV and GLD funds say this in all honesty? I am not convinced that they can. If not, then they CAN be crashed via a number of large investors demanding more physical metal than they happen to own or can get their hands on quickly. If leverage is involved, then it is only a matter of some of their large clients demanding physical delivery before the ETF crashes. Consider that if an ETF were to be leveraged 50 to 1, they can only pay off 2% of their clients with the metal they have on hand. If any more than that demand physical delivery and the system allows them to take physical delivery, they are financially ruined. This is a situation wherein we have fractional reserve PMs and it is inherently unstable, partcularly when things go wrong... and there seems to be a lot of that happening these days. Can we say MF Global? Why, yes, we can!  On top of everything else, if the large investors can take physical delivery but their small clients cannot, guess who gets to hold the empty bag if this system comes unraveled. |
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Replies: 8 / Views: 1,439 |
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Posted 11/19/2011 12:58 am
