3 Ways to Invest in China's Powerhouse Economy
Katy Marquardt
It's poised to become the world's largest economy, but there are factors to consider before jumping in
With the latest forecast that China could take the reins as the world's largest economy as soon as 2030, experts are debating how its growth should be measured and if it will indeed outmuscle the United States. But regardless of when (and if) China will reach that milestone, the country's powerful and growing influence on the world economy cannot be ignored.
Should you reserve a spot in your portfolio for this emerging superpower? Investors would be wise to consider the country's big economic picture, which isn't as black and white as the numbers. That picture is full of contrasts. Factors fueling
"It's more complicated than saying 'I'm going to pick the biggest, most fast-growing country,'" says
As is the case with other emerging markets, Chinese investments are notoriously volatile. Consider the performance of China-region mutual funds over the past few years. Virtually all stripes of mutual funds took a deep dive in 2008, but China funds particularly fell hard. During that year, the average fund focusing on this region lost more than half of its value, making China-region funds the second-worst performing category behind
Although China funds haven't offered a smooth ride, the category has rewarded investors with an average gain of 14.3 percent per year over the past five years through
Another factor to consider before jumping into China:
You may already have it in your portfolio, Rocco points out.
Vanguard Total International Stock Index,
for example, holds a quarter of its assets in emerging markets,
including a 5 percent stake in Chinese stocks. And
"To make a bet on a particular market is not a good idea for most investors," says Rocco. "Who it does make sense for is people who already have a well-balanced portfolio and understand that they may already have a significant amount in China. It's more akin to buying a stock than fund -- high-risk and high-reward for people with a long time horizon who understand what they're doing."
Here are three China funds for such investors:
1.Matthews China Fund.
The 2.Guinness Atkinson China and Hong Kong Fund.
The Looking for China exposure on the
cheap? This exchange-traded fund (symbol GXC), which holds about 130 stocks, charges 0.59 percent in annual fees (compared
with 1.21 percent for Matthews China and 1.58 for Guinness Atkinson China & Available at Amazon.com:
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