Ask Matt: What's a smart way to invest in China?
An investor gestures as he monitors the stock prices at a private securities company in Shanghai, China.(Photo: AP)
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at This email address is being protected from spambots. You need JavaScript enabled to view it..
Q: Are there good ways to invest in the Chinese stock market?
A: Investors couldn't add Chinese stocks to their portfolios fast enough in 2006 and 2007. But since the Chinese-stock bubble burst in late 2007, many investors are afraid have become financially Sinophobic.
It's understandable that investors would be afraid to get back into Chinese stocks. Pundits and TV commentators routinely told investors to jump into Chinese stocks, since the economy there was growing more rapidly than in the U.S.
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Yet, the FTSE China 25 index, which tracks shares of the biggest Chinese companies, collapsed nearly 70% between the high of October 2007 to the low set in October 2008. Meanwhile, countless investigations into the accounting of some smaller Chinese companies further unnerved investors and made them wonder if the risks were worthwhile.
If anything, the harrowing experience many investors had with Chinese stocks highlights the extreme risks of shares of companies in emerging nations. While emerging market stocks generate some of the highest returns of any mainstream stock asset classes, they're also among the absolute riskiest.
If you're sure you can tolerate the risk of emerging market stocks, and Chinese stocks, there are several plays. The iShares FTSE China 25 ETF gives you exposure to just China. Another option is the Vanguard MSCI Emerging Markets ETF, which puts 18% of its investment in China, which is the biggest representation of any country.
References
- ^ https://portfoliotracker.usatoday.com/?uref=mkrantz/ (portfoliotracker.usatoday.com)