Trying To Catch Up

One of our clients is a 401k with multiple participants. They just funded for the year and I have had to implement the new money this week which is as time consuming as it sounds.

So naturally I got a flood of questions on the blog.

First is the ETN/ETF issue. Reader RW left the Investopedia definition that you can read here. I can't really improve on that. As I understand it, the ETN structure makes for friendlier tax treatment for payouts from the ETN as the commodity aspect of the older ETNs would make for unfriendly treatment if they were ETFs and not ETNs.

The last I heard the IRS had not decided but Barclays believes that the ETN structure as a debt instrument does the trick. From a practical day to day standpoint I don't think the fact that it is a debt instrument means much. Barclays (client holding) is unlikely to default on its paper. If you think otherwise then you should not buy any of the ETNs.

As for why the India product is an ETN, I think I read somewhere that it has to do with the foreign ownership restriction of Indian shares but I have not really dug into the product. For my clients that have Indian exposure I use IIF which I have held for more than three years for some folks and so I am very comfortable with it. India is tricky (subjective opinion) and in this case I like the track record provided by the fund. INP might turn out to be the best way to go but I don't feel the need to figure that out on INP's second day of trading.

One last thing on ETNs was a question about whether or not they should be in IRAs for tax reasons. The ETNs each capture a certain effect, commodity, India, whatever. In my opinion you should focus on the effect being captured and not the taxes as a first or even fourth priority. Commodities can be volatile, where do you want that volatility? This is very subjective and I know taxes are the first priority for a lot of people but that is just not how I view it.

A reader asked for my opinion on BLDRs Asia ADR 50 Fund (ADRA). Based on the comment I'm not sure exactly what he was asking but the fund is 60% Japan, I have no interest in owning Japan, something I have been saying since the start of this site. My Asia exposure includes China, Vietnam, Taiwan (in just a couple of instances) and Australia (Oz is its own continent but seems to lumped in with various pan-Asia investment products).

The last thing was a question about distortions on charts caused by large ex-dividend reductions. It seems like the free chart sites (which is what I use) don't usually smooth it out properly. If you have to have undistorted charts you will probably need to pay for it. Sometimes the free sites do account for this properly but I don't feel like I can rely on them to do this. I don't pay up for charting as I use charts more to help confirm as opposed to driving the bus.