ETF Research and Analysis
by Paul Justice, CFASuitability
IPath Dow Jones-AIG Commodity Index TR ETN DJP, an exchange-traded note, provides a one-stop-shopping experience for investors seeking broad commodities exposure. Easily the largest ETN on the market, this fund accounts for roughly Read more
IPath Dow Jones-AIG Commodity Index TR ETN DJP, an exchange-traded note, provides a one-stop-shopping experience for investors seeking broad commodities exposure. Easily the largest ETN on the market, this fund accounts for roughly Read more
Bull Case
The rules governing the tax-treatment of commodity index-tracking ETN returns are up in the air right now. Barclays' interpretation has been that shareholders pay taxes upon redemption only. However, the IRS is reviewing that treatment.
Barclays Bank promises the return of the index, so investors aren't exposed to the risk that the fund's pre-fee returns will diverge meaningfully from the benchmark's. That's valuable in the commodities space, where it can be difficult to track prevailing indexes given the transaction costs involved. Read more
Bear Case
The IRS has not yet ruled definitively on the tax treatment for exchange-traded notes.
Commodities are volatile, so investors need to be prepared for bumps.
Investors here aren't purchasing shares in a trust. They're investing in a special type of debt instrument issued by Barclays Bank. As such, they court the risk that Barclays could fail to make good on its promise to repay the debt plus the stated index return. Read more
The Best ETF Sector Idea for 2010
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