Profit From the Fantastic Four

But investing directly in China isn't as easy as you may think. William Blair's Urbina says that from a big-picture perspective, China is more attractive than India. But on the individual-company level, China is wanting.

Recall that the modern Chinese economy and its stock exchanges are recent phenomena. Chinese companies don't have much experience managing through hard times, and the challenges are growing. Inflation has spiked this year and wages are rising rapidly on the coast. The Chinese currency is steadily appreciating. The government has suppressed domestic energy prices (Chinese are paying less than half the world price for oil), which is an unsustainable policy.

So as in India, you're probably best off with a fund manager who knows the lay of the land and can deliver a diversified, dynamic portfolio. One such manager is Richard Gao, of no-load Matthews China ( MCHFX), which has returned 17% annualized over the past decade. Gao says he's reduced the fund's exposure to exports because of rising domestic costs and a weak U.S. economy.

Instead, Gao is focusing on the Chinese consumer. "Domestic consumption will become the driving force for China's economy going forward," he says. Growth premised on the rapidly expanding urban population is more consistent and sustainable than depending on export markets.

Gao notes that retail sales are expanding by 20% a year in China. He likes the intersection of technology and consumption. Two of his favorite stocks are China Mobile ( CHL), the world's largest cell-phone operator, and Sina ( SINA), the nation's leading Internet portal -- the "Yahoo of China."

You can also invest in China through an open-end fund, Fidelity China Region ( FHKCX), and through China Fund ( CHN), a closed-end fund with an impressive long-term record (a return on its assets of 22% annualized over ten years). It recently sold for a 12% discount to NAV. Indexers can gain entry to the Middle Kingdom via iShares FTSE/Xinhua China 25 ( FXI), which holds 25 of the nation's largest, most liquid companies.

All BRICs all the time

Finally, if you prefer the less volatile path of investing simultaneously in all four BRICs, you can do so through two ETFs. The Claymore/BNY BRIC ETF ( EEB) is heavily concentrated in Brazilian and Chinese stocks. The iShares MSCI BRIC Index ( BKF) ETF is more evenly balanced among the four BRIC nations.