In The News
ETFs may be the way to go to tap into foreign markets
By Matt Krantz
1/12/2006 7:08 PM EST
Q: I would like to invest in index funds that own stocks trading in China and India. How can I do that from here in the USA?
A: Bull markets in stock markets outside of the United States are making investors eager to invest in countries they can't even pronounce.
It's hard to fault them, especially since the Standard & Poor's 500 index gained only about 3% in 2005 and has been basically flat the past five years.
Two nations attracting big-time interest from investors are China and India. Both countries are benefiting from a rapid industrialization and the rise of a new middle class as they become a nation of consumers and producers.
Both countries also have the benefit of being home for many "offshore" operations being created by U.S.-based companies looking for low-cost labor. And that's turned these nations into attractive investments.
Luckily, there are many ways for investors to take part in the excitement going on in both countries. Since you're looking to own index funds, there are several possibilities from exchange-traded funds, which are index mutual funds that trade like stocks.
Two China-specific funds you might consider are the iShares FTSE/Xinhau China 25 (FXI) and PowerShares Golden Dragon Halter USX China Portfolio (PGJ). Both have advantages and disadvantages. You can research them at Morningstar.com or etfconnect.com.
For India, you can consider one of two closed-end ETFs, which trade much like closed-end mutual funds. For more information on closed-end ETFs, you can read this article by USA TODAY's mutual fund guru.
The two closed-end ETF options for India are the India Fund (IFN) and Morgan Stanley India Investment Fund (IIF).
Lastly, you may want to consider standard mutual funds that focus on these countries or regions. You can also use USATODAY.com's free mutual fund screener.
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