NEW YORK (CNN/Money) - I want to get exposure to Chinese equities. I feel the country is going to have a boom five to 10 years down the road and I feel if I invest now, I will be getting in early. What are the small and mid-sized equity companies in China of which stock can be purchased?

-- Anonymous, New York, NY

First of all, if you begin investing in Chinese stocks at this very second, you're not going to be getting in early -- or at least not early in the sense of buying in before your fellow investors are onto the investing potential of China.

Believe me, the China story is out there -- witness the huge runup in Chinese stocks in general last year and the bubble-like mentality that has built up around the stocks of Chinese Internet companies in particular.

Indeed, yours truly fielded a question about Chinese net stocks last August (click here to see my sage advice) and a number of mutual funds and other money managers have been trawling the Chinese waters for stock picks for several years. So don't think you're going to fly in under the radar and pick up something on the cheap because no one else has been paying attention.

That said, however, I don't think there's any doubt that China is the growth story of the early 21st century. Here in the U.S. we get all excited if our economy grows at 3 to 5 percent per year. Yippee! By contrast, economic growth last year in China came in between 8 and 9 percent, despite SARS problems and other concerns.

There's a question of how long this kind of torrid growth rate can be sustained, of course. But given the size of China's population, its productive capacity, how far the country still has to go to come up to modern Western standards in terms of technology and lifestyle and the fact that it wants to impress the rest of the world when it hosts the summer Olympics, there's a huge potential for growth.

Prudential Securities economist and chief investment strategist Ed Yardeni stated in a recent report that just to accommodate the 20 million or so people who are migrating from rural areas to Chinese cities, China must build the equivalent of one Houston, Texas per month. He believes this demand help creates what he calls a "growth imperative" that will keep China's economy cruising along at warp speed.

Keep in mind, though, that high economic growth rates alone do not great investments make. There's also the price you pay for securities. And if you overpay, you could be in for a subpar return for a very long time, or worse.

Back in the early 1990s lots of investors piled into emerging-market stock funds because economies like Thailand, Malaysia, Korea, to name just a few, showed lofty economic growth rates. And in 1993, when emerging-market funds as a group posted an average return of more than 70 percent, these funds seemed like a can't lose proposition.

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In part because of problems in emerging-market economies and in part because securities prices in these markets got up into the stratosphere, returns nosedived and these funds lost 30 percent over the next five years. They've since bounced back, but the point is that the ride in emerging markets -- and that's what China is -- can be wild in the extreme.

That's not a problem when the volatility is on the upside. You rarely hear people complain about returns being too high. But when the downside volatility kicks in -- and you can't have upside potential without downside risk too -- well, that's when people begin to wish they'd been a bit less irrationally exuberant in their expectations, and their commitment of investment resources.

Which leads me to my two main suggestions when it comes to playing China. First, you should consider Chinese equities only if you've got a high risk tolerance and you're playing with money you could afford to lose a big piece of. This is not a core holding. We're talking about China combined with other emerging market investments representing maybe 10 to 20 percent, tops, of the foreign portion of your stock portfolio.

That means if you have, say, 20 percent of your total stock holdings in foreign stocks -- an amount that's probably higher than what most Americans have -- you would be talking about 2 to 4 percent of your holdings in emerging markets, including China. So China alone would represent even less than that percentage.

If China grows into a more developed nation, this percentage can increase. But for now, this country is a speculative investment and deserves only a cameo role in a portfolio.

My second suggestion concerns how to get in on China. Frankly, I think the idea of small U.S. investors buying individual stocks in such a country is ridiculous, and the idea of individuals sorting through small- and medium-sized firms goes way past ridiculous into totally absurd territory.

Seriously, how many individual investors really have the time to devote to researching individual Chinese firms and the ability to evaluate those companies considering the different set of business playing rules in China, the different accounting standards, etc. I'd say very few.

And we haven't even gotten into the issue of exchange rates and how different companies could be affected if China ever decides to unhitch the Yuan from the U.S. dollar.

Realistically, I'd say that mutual funds are only way to go here. And even then you've got your work cut out for you sorting through the different offerings, although at least you have some performance and portfolio data to sift through that can help form the basis of a rational decision.

If you want to explore that route, you'll find a fairly comprehensive list of both open-end funds that invest in China by clicking here and a list of closed-end funds here.

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You can then get further information on these funds by plugging their names into the Quotes/Reports box at Morningstar.com. You can also get more information about the Chinese market and the Chinese economy by clicking here and here.

I think it's appropriate to end with a few words from that renowned sage Confucius, who once said, "Invest too much in risky Chinese stocks, and you may end up losing your fortune, cookie." All right, so maybe Confucius didn't say that. But you get the idea.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.