Burt Bacharach and Dionne Warwick might have thought that what the world needs now is love, sweet love, but the Nasdaq Stock Market thinks that what the world needs now is a new "Nasdaq China Index."

Here's the scoop: The China Index will initially be made up of 30 of the biggest Chinese companies that trade on U.S. exchanges -- not just the Nasdaq. (There may be more than 30 companies in the future.) You can expect to see it, with the ticker symbol CHNX, by the end of June. To make it into the index, a Chinese company needs to have a market capitalization of more than $200 million, an average U.S. daily trading volume of more than 100,000 shares, and a price of at least $3 per stub. Two firms that we can expect to see in the index are China Mobile (NYSE:CHL) and Baidu.com (NASDAQ:BIDU). Other candidates include PetroChina (NYSE:PTR), China Life (NYSE:LFC), and Sohu.com (NASDAQ:SOHU).

What it means
What does this mean for you and me? Well, you can't invest in the indices themselves -- but you can invest in them indirectly through index funds and exchange-traded funds. There aren't yet any such vehicles based on this index, but given that there are index funds and ETFs based on smaller niches of the world markets -- for example, the new HealthShares Cardiology ETF (NYSE:HRD) -- there will surely be some soon.

What this means for the Nasdaq is money. As companies base new funds on the new index, they'll be coughing up some tribute to the Nasdaq. So this index isn't necessarily filling a critical hole in the global indexing world. Indeed, there are already various indexes out there focusing on China -- so you don't necessarily have to wait breathlessly for this new index to launch. Here are some articles discussing a bunch of China-based investment possibilities:

But wait ...
There is a downside to this kind of focused international investing. The main original benefit of index funds was that they offered you instant diversification into broad swaths of the market -- or pretty much the entire market. But now, with much more focused indexes, that diversification protection isn't always there. Sure, this new index will spread your money over 30 (or eventually more) companies. But they'll all be based in a single country -- one lacking the kind of stable political and economic environment that we enjoy in the United States. In fact, few countries approach the level of shareholder-friendliness you'll find in America. Here you can expect quarterly reports and audited annual reports from your holdings. Elsewhere? Not so much.

If the Chinese economy takes a big hit, so will these investments. Meanwhile, if one or a few of the companies in the index implodes, it won't necessarily be removed quickly. There's something to be said for picking your stock investments carefully and individually, if you're savvy enough to do so.

The bottom line
My grumbling aside, it is smart to have some international investments -- since our own economy may be the one that temporarily tanks. If you really want to devote a reasonable chunk of your portfolio (i.e., not the majority) to China-based investments, you could do worse than going with an index fund or ETF. (Learn all about why ETFs are great investments for some of us.) But also consider some alternatives.

One option you have is our brand-new Motley Fool Global Gains newsletter, which aims to deliver the world's best investment ideas to its subscribers. Our analysts do a lot of digging into each recommendation, and they'll tell you whenever they think it's time to sell, as well. I encourage you to take a free test-drive (with no obligation) of the service.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Baidu is a Rule Breakers recommendation. The Motley Fool is Fools writing for Fools.