Investing In China through ETFs

First Published: June 20, 2010 ADawnJournal.com

ETFs, or exchange-traded funds, are considered to be some of the safest forms of investment in the world today. If you are thinking of investing, and don’t mind less reward for less risk, then an ETF is what you should be looking at. Currently, China is a growing giant that will probably overtake the United States midway through the 21st century as the world’s largest economy and that has a lot of investors thinking about getting in on the action. However, China is still a difficult investment because of the chaotic market in the country; so many investors decide to invest in China through ETFs. If this is something that would interest you, then here is how you go about it:

1. Look at various Chinese ETFs available based on their industry weights, how many holdings are in each ETF, and the expense ratios of the ETFs. Some that you can look at include iShares FTSE/Xinhua China Index, which is based off an index that has 25 companies in it. There is also the SDPR S&P China ETF and this one has more companies than the iShares ETF.

2. You should consider not only investing in ETFs that are focused in China, but throughout much of Asia, which is currently booming while the rest of the world is suffering through a recession. One example ETF that you can look at is Vanguard’s Pacific ETF. Another one to consider is iShares MSCI Taiwan Index Fund. An index fund is a form of the ETF which is often considered the safest type of stock investment in the world. Another ETF to consider is the iShares MSCI Hong Kong Index Fund.

3. In Canada, financial institutions like BMO, BlackRock, Claymore offer China and emerging market ETFs. Some of the examples are BMO China Equity, iShares China Index Fund, Claymore Brick ETF etc. A good resourceful ETF site is TMX Money.

4. After you have done the research for your ETFs, all you need to do is talk to your investment broker about what you want to invest in, and they will take care of it for you. However, this will cost you commissions and fees so if you want to keep from losing that money, you can invest yourself. The best way to do this is to get the ticker symbols of the ETFs that you want to buy into, go into your investment account and purchase these stocks as you would any other stock.

China is a booming country that is going places in the world. It will soon be the largest economy in the world, and with the world’s largest population it is also a force on the production and manufacturing platforms. That all being said, many feel that China is still a risky investment, and you should decide to invest in China based on your own risk tolerance and unique investment objectives. However, ETFs may provide a better alternative than directly buying stocks and also, it’s a lot easier to get in on the action as China continues to take the world by storm and generate capital for the investors who can tolerate risk and put money into this growing giant from the Far East.

With some risks, ETFs can be still better but profitable, and may be the best option when investing in China.

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