Invest In China

China is just now regaining its place at the table of great nations. A table that was headed by China for 2 millennia. China will rival the US soon as the most powerful economy in the world. This day may be coming sooner than we think. Despite the worldwide economic downturn China is one of the best long term investing bets there is.

One way to invest in China is to buy a China focused mutual fund. There are dozens to choose from. For half a decade the returns on such funds was truly stellar 40%+. This has however come to an end. The expensive loads associated with such funds have not however. Many of these loads can be 5% or even more right off the top if you buy them from a broker. The internal fees of such funds also tend to be above the norm, 1.5%-2% or more. This is too much money for me. That is why I shy from mutual funds Chinese or not.

Another way to invest in China is to invest in the individual companies based in China. There are thousands of good candidates. One must be aware though that the rule of law in China is still very subjective. If one were to buy stock in a company that found itself on the wrong side of the Party your investment might just evaporate. The evaporation of funds is unfortunately a reality with all stock investing.

I personally prefer to invest in China via ETFs, or exchange traded funds. Such funds typically seek to follow broad indexes like some mutual funds, and so spread risk, but they lack the costs of mutual funds. ETFs have no exorbitant “loads” though you will pay a commission to your broker upon purchase, but it’s the same as a stock.  You can also get in and out of ETFs quickly which is important these days.

I like the Ishares MCSI China ETF, FXI. It seeks to follow the performance of the FTSE/Xinhua China 25 Index. It is in my opinion the best, lowest cost way, to play China in a macro way.