Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect China-based stocks to prosper over time as the country's economy develops, the SPDR S&P China ETF (NYSE: GXC ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in a lot of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The China ETF's expense ratio -- its annual fee -- is 0.59%, which is a bit higher than that of many ETFs, but also significantly lower than that of the typical stock mutual fund.
This ETF has performed reasonably well, outperforming its benchmark over the past five years with some wild swings, as you'd expect. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 9%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several China-based companies had strong performances over the past year. NetEase (Nasdaq: NTES ) , up 29%, is involved in online gaming, and sports average annual growth rates for revenue and earnings of 25% or more over the past five years. It also offers email services and sports some 480 million accounts. It offers microblogging services, as well, with 121 million users and a 24% growth rate.
China Mobile (NYSE: CHL ) gained 14%, and is rather compelling; it offers mobile communications services in a country with nearly a billion cell-phone users where only 24 million smartphones were shipped last year. That spells opportunity, as does the prospect of China Mobile-powered iPhones and a 4.1% dividend that's being increased at a strong rate.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Chinese oil giant CNOOC (NYSE: CEO ) , down 26%, also offers a significant and briskly growing dividend. Its revenue and earnings have been growing at an average annual clip of about 20% or more over the past five years, and that growth is accelerating. High oil prices have led many companies to focus more on deepwater drilling, and CNOOC is no exception.
Then there's search-engine giant Baidu (Nasdaq: BIDU ) , which has finally fallen some after being quite a market darling for a long time. Its investors got good news recently, when a deal was struck to integrate Baidu's engine in China's iPhones and iPads. Bears are skeptical of some of the company's plans, such as offering its own smartphone. They also see the company's growth slowing -- but even a slower rate would represent brisk growth.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If you're doubtful that China will grab more and more manufacturing from the rest of the world, you're not alone. Check out our special free report, "3 Stocks to Own for the New Industrial Revolution ," which points to a new technology (and its compelling corresponding stocks) that can usher in a new "Made in America" age.