In an article in InvestmentNews.com, Jessica Toonkal writes that with fund firms launching a seemingly endless parade of exchange-traded funds, a dark side to this glut of offerings is emerging. Portfolio liquidations, once rare, are becoming increasingly commonplace. This recent trend is scaring advisers. Indeed, some said they are more than a little worried about getting stuck in an ETF that ends up being shut down.

“With the proliferation of ETFs, this is becoming a greater concern,” said Sailesh S. Radha, a vice president at CCM Investment Advisers LLC, a registered investment advisory firm that manages $2.5 billion in assets. “Telling an investor than an ETF is shutting down is not news you want to give them.” said.

So how can an adviser spot trouble before it strikes? Here are a few warning signs to look for:

Has your ETF been around too long?

It is important to pay attention to how long an ETF has been around. You need to pay attention to how long an ETF has been on the market. “No one launches ETFs, then closes them a couple months later, except for Northern Trust [Corp.],” Mr. Hougan said, taking a jab at the Chicago-based firm, which closed 17 ETFs last February only 11 months after launching them.

Small Assets?

We are reminded that an ETF that has has less than $10 million in assets – and has been around for a couple of years or so – should raise a red flag for advisers. It’s clearly not gaining traction with advisers.

Crowded Assets?

Advisers also should pay attention to how an ETF is trading and if the fund is best-in-class, said Matt Hougan, president of ETF analytics at IndexUniverse. An ETF’s assets may be puny, but if it’s one of the few funds in an asset class that is poised to take off, it may stick around longer, he explained.

How are the other ETFs doing in the firm?

The article goes on to remind us that advisers also should take note of the investment adviser for the funds. If the firm manages a large number of profitable funds, it could buy additional time for laggards, said one executive at an ETF company, who asked not to be identified. “As long as you have a few ETFs that are the money makers, you can afford to have a few that take longer to gain assets,” the exec said.

If you have invested in ETFs and lost money, you may have valuable legal rights to be compensated for your losses. Call a Securities arbitration lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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