Look for early signs that an ETF is headed for delisting

Article Excerpt

New ETF launches, and the continuing growth of leading funds, attracts a lot of attention from the business media. But at the same time, there are a large number of ETFs regularly terminating their listings. Our best advice for investors is to avoid, as much as possible, investing in ETFs that run the risk of delisting. One reason is those investments can trigger unwanted tax consequences—like an early capital gain. An ETF with a small and declining asset base—common with funds that target a fading trend like bitcoin, for example—is an important warning sign that it’s vulnerable to delisting. If investors get caught up in a delisting, they should sell their shares as quickly as possible after the delisting announcement has been made. That will let them get their cash back without delay, and then let them reinvest it as soon as possible. Shareholders typically receive notification of the liquidation between a week and a month before it occurs. At this point,…