Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

What To Do If Your ETF Shuts Down

The words "closure" and "shut down" are rarely synonymous with anything positive, especially in the world of investing. Maybe that's one reason why I get a lot of questions from folks about what to do if they own an ETF that is closing down. This issue has been getting increased attention and there's two schools of thought on the matter.

The first is that given the rapid growth of the ETF business, some failures are bound to happen along the way. The second is an unhelpful, alarmist tone that implies ETF closures are symptomatic of broader-ranging problems.

Count me among those in the first camp. Forty-nine ETFs closed last year, compared with 56 in 2009 and 58 in 2008. That's a total of 163, but over 170 new funds came to market last year alone. Are there going to be ETF closures in 2011? Yes, that's a certainty and at this early stage in the year, it's hard to say that new fund debuts will outpace closures, but using history as a guide, I feel pretty safe in saying we'll be reading about more new ETFs than we will ETF obituaries.

While an ETF going out of business isn't the end of the world, the thought of does cause investors some consternation along the way. That's why I'm a fan of having a simple checklist that can help you stay away from ETFs that may headed to the ETF landfill. Just ask yourself a few quick questions if you're worried about an ETF's future.

  1. Is your ETF a year old or older?

  2. Has that ETF attracted somewhere between $30 million to $50 million in assets under management?

  3. Is the daily trading volume thin, say something in the order of 1,000-3,000 shares?

  4. Is there a comparable ETF to yours that has robust assets and trading volume?

  5. Does your gut tell you that the idea behind this ETF is too complex or destined to be unpopular with most investors?

If you answered "yes" to nos. 1 and 3-5 and "no" to number two, there's a good chance an ETF with these traits is living on borrowed time. That said, some folks may be inclined to hold on and hope for the best. recently interviewed Paul Weisbruch of Street One Financial about the risks of ETF closures and he made some points worth remembering.

Weisbruch correctly notes that there is really no uniform process for ETF liquidations and that some go smoothly and others are subject to panic selling because investors are fearing the worst. There are recent examples of both scenarios, but trying to unload a large position when the liquidation is announced rather than on the actual liquidation date can be a tricky process, Weisbruch points out.

The bottom line with an ETF closure is that you're going to get a cash distribution after the fund's issuer sells off the underlying assets. That's not the end of the world and it doesn't mean a loss of capital either, but this situation is avoidable. Just use the checklist.

Click HERE to learn more about the ETF Profit Report - An ETF Trading Service For Serious ETF Investors
The "Heavy Lifting" Is Done For You To Create These Big Green Profits...

There will be TONS of money made by early investors in new alternative energy technologies such as algae bio-fuel.

But there also could be some really nasty surprises in store for you if you buy into technologies that turn out to be duds.

So why not let the experts do the "heavy lifting" of weaning out only the new technologies that could potentially create fortunes for early investors?

And even the experts need to be careful...

That's why they only pick the safest methods to invest in new technologies, while preserving the chance for huge profits.

To get more details on how you can profit mightily as the experts pick the safest ways to invest in new technologies, tap on the link below...

YES! I Want You To Do All The "Heavy Lifting" And Guide Me To The Safest Ways To Make Lots Of "Green" In Emerging Technologies!

For more information and archived issues, visit

Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

Would you like to republish this article? Global Profits Alert issues can be republished, as long as the republished issues contain the name of the author(s) and the following short paragraph:

This information was brought to you by, a publication of Trippon Financial Research, Inc. publishes information on Investing in the China stock market and emerging markets, dividend stock and income investing, exchange traded funds (ETFs), green energy stocks, technology stocks, global market trends and other investment information. To view archives or subscribe, visit