Nevertheless, China, with the growth potential of its economy, may act as a strong addition to any investment portfolio. The expansion may also help strengthen the Chinese yuan over the long term, which would further benefit investors converting to U.S. dollars.
The iShares FTSE/Xinhua China 25 Index Fund ETF (FXI) is a relatively concentrated fund, with only 25 large-cap company holdings. The ETF has a heavy emphasis on the financial sector, which makes up 54% of its portfolio. FXI has an expense ratio of 0.72%.
The SPDR S&P China ETF (GXC) covers a broader swath of companies, including 182 component holdings. While the SPDR ETF also has a heavy weighting in financials, it is a lower 33% allocation. GXC has an expense ratio of 0.59%.
ETFs can give you international exposure to BRICs and other emerging markets in a variety of ways. The variety is there, but it's important to know what is under the hood and the exposure to country and sector allocations.
Tom Lydon is editor and publisher of ETF Trends, a Web site with daily news and commentary about the fast-changing trends in the exchange-traded fund (ETF) industry. Lydon is also president of Global Trends Investments, an investment advisory firm specializing in the creation of customized portfolios for high-net-worth individuals. Disclosure: At the time of publishing, Mr. Lydon's clients owned IndexIQ Agribusiness Small Cap ETF (NYSEArca: CROP).
Read the disclaimer: Tom Lydon is a board member of Rydex|SGI.