Exchange-Traded Notes Can Be Better Than ETFs

Move over, exchange-traded funds.

ETFs, which are portfolios of securities, have taken the investment world by storm in recent years. Investors like the fact that they always know they're holding and can trade them throughout the day -- two big advantages over mutual funds. Last month, the number of ETFs available in the U.S. reached 570, nearly 60% more than at the end of last year.

But there's a new kind of investment product that has less tracking error than an ETF and is more tax-efficient.

Like ETFs, exchange-traded notes track a benchmark index and trade on an exchange. But that's where the similarities end. ETNs don't hold stocks, bonds or even futures contracts; they are senior, unsecured debt. ...