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Two levels of flawed thinking are exposed when an exchange-traded fund is targeted for termination.

One involves the ETF company’s business case for launching the ETF in the first place, while the second concerns the investors who bought in. ETF companies know that not all funds will work, so terminations are not that big a deal for them. But for individual investors, holding a fund that is wound up suggests they’ve wasted their time and money.

An example of an ETF headed for termination is the BMO Shiller Select US Index ETF, which was launched in October 2017 with the ticker symbol ZEUS. That’s a lot to live up to.

The idea behind this ETF sounds good -- build a portfolio of undervalued stocks based on Prof. Robert Shiller’s CAPE ratio, which stands for cyclically adjusted price-earnings ratio. Mr. Shilller is a Nobel-prize winning economist. And stock markets have surged until lately -- why not look for companies that haven’t gained as much as the broader market?

One reason is that value stocks have not done well for quite some time. The stocks doing best these days seem to be those that are less volatile than the broader market. There seems to be little patience for investing in beaten down stocks with rebound potential.

But that’s a secondary reason why investing in ZEUS hasn’t worked out ideally for investors. The bigger factor is that ETF investing works best when you buy funds that track the biggest, most widely followed stock indexes. For a couple of reasons, it’s exceptionally hard for ETFs using other strategies to beat index-tracking ETFs.

One is fees. ZEUS has a management expense ratio of 0.73 per cent, while the BMO S&P 500 Index ETF (ZSP) is at 0.09 per cent. Low fees are a huge advantage when investing in ETFs, and other investment products as well.

The second reason why index-tracking ETFs are your best bet is that other strategies often fail to measure up in their long-term performance, even if they sometimes excel in the short term. ZEUS never did have its day. The fund underperformed ZSP in 2017 and 2018, and it’s lagging again in 2019.

With time, ZEUS might assert itself. But BMO Asset Management is not waiting. The company announced ZEUS will be terminated on or around Nov. 1. Unitholders will receive the net asset value per unit on that date. What to do with the money? There’s always ZSP.