So Should You Buy a China Fund?
By Lisa Gibbs

(MONEY Magazine) – The average China mutual fund rose 63% last year, and investors clamoring for some of that sizzle sank $840 million into China portfolios in 2003. That was nearly nine times as much as the year before. In the first two months of 2004, another $260 million poured in. Chasing performance is a classic investing no-no, but that's just one of several reasons why we'd avoid a direct China play now.

The country shows increasing signs of burnout from too much growth too fast--it has recently seen power outages and commodity shortages. And remember, China remains a Communist country where the government controls the economy and most large companies--China is still far from having a true market economy. Matthews China Fund co-manager Mark Headley says investors shouldn't touch a China fund unless they can stomach a 20% to 30% correction, or worse. When markets are high, a lot of people say they can do that; we don't know many who actually can. Most of us are better off with a diversified foreign fund that spreads the risk over many countries and industries. --LISA GIBBS