ETFs That Die : A Risk Factor

Another ETF died yesterday.

Powershares ETF, PXN was introduced in year 2005 and was based on the Lux Nanotech Index™ (Index). The Fund invested at least 90% of its total assets in common stocks that comprised the Index. The Index is designed to identify a group of companies that are in the nanotechnology field and are involved with funding nanotechnology development, developing nanotechnology applications, manufacturing goods that incorporate those applications and/or supplying tools and instrumentation to nanotechnology researchers.

After about 9 years of quite dismal performance, at the close of business on Tuesday, Feb. 18, 2014, the PowerShares Lux Nanotech Portfolio was liquidated and it was the final day of trading for the Fund.

Such sudden deaths of ETFs often catch the investors off-guard and this is a risk that is hardly ever talked about by investment advisors. While the constituent stocks still continue to trade, the ETF stops trading and spoils any long-term investment objectives that the investors may have.

Another ETF that comes to our mind is Claymore/Robb Report Global Luxury ETF, ROB which was designed to invest in companies that provide luxury goods and services. It was introduced in August, 2007 and -- after a dismal performance over 3 years -- it died young robbing off all fashionable dreams of its investors.

Beware of this risk in ETF investing.